This is the 7th post for the weekly series on the state of securities with a focus on fintech, Bitcoin, blockchains & distributed ledgers.
Here are some of the key developments, stories & updates from the digital securities industry over the past week.
“FedEX vs NY Times Standoff”
The media has had its day.
There are almost no actual journalists left.
The big marketing houses like NYT exist solely based on goodwill generated by a previous generation. The current generation, is unable to stay relevant with changing media tastes and demographics.
We used to need the news media to tell us what was true. Today we have many sources of information and the news media is not any more reliable than citizen journalists who are able to fact check and report first hand in real time.
This has caused a drop in revenue and for many to resort to more clickbait style articles. Bias is also a huge issue.
Full statement from Frederick W Smith, Chairman and CEO of FedEx Corporation on their response to the New York Times article.
“Grayscale Bitcoin Trust’s Step Forward with SEC Filing”
Grayscale had launched the first-publicly traded Bitcoin investment product in the United States in September 2013 which has now grown to become the largest Bitcoin investment product in the world. On November 19th they filed a Registration Statement on Form 10 with the SEC on behalf of their Bitcoin trust and although it is subject to SEC review, if it is approved, “it will designate the Trust as the first digital currency investment vehicle to attain the status of a reporting company by the SEC.” There are a few things that would change if this is approved such as first mover advantage, an additional liquidity opportunity, a broader investor audience and SEC reporting. This is an interesting development from Grayscale, here’s their medium article which outlines this development and the impact it may have on the industry.
“Global Protests Reveal Bitcoin’s Limitations”
Currently around the world there are protests going on in Hong Kong, Lebanon and Iran, the people there are on the ground testing out digital assets for real use cases, but have been running into issues. Often times in these areas during protests there is little to no internet connection available to protesters in addition to some protesters not understanding how to use and transact with digital assets.
Communication is also a major issue here, when the Government shuts down the internet protesters often cannot communicate with one another or even with the outside world. As stated in the article, “Not all people are hackers and network experts…When we talk about a payment network it must have a significant number of members.” Full CoinDesk article on the global unrest that is currently going on while outlining some of bitcoin’s limitations.
“China Central Bank to Set Standards for 17 Fintech Categories, Including Blockchain”
The People’s Bank of China (PBoC) is aiming to better regulate new technologies throughout the financial sector, which also includes blockchain technology. Cloud services and artificial technology will also be included among the categories. Their Vice President Yifei Fan had this to say about the development, “The current regulations for financial services are not clear and strong enough to guide high-quality developments in the industry.” Full Yahoo Finance article on this development by the PBoC.
“New Bipartisan Bill would Classify ‘Managed Stablecoins’ as Securities”
Two members of the House Financial Services Committee, Reps Sylvia Garcia and Lance Gooden on November 21st introduced a bill titled the “Managed Stablecoins are Securities Act of 2019.” The main goal of this bill would be to protect consumers against certain cryptocurrencies, for example Libra. As Sylvia Garcia states, “Bringing clarity to the regulatory structure of these digital assets protects consumers and ensures proper government oversight going forward.” Full press release from representative Sylvia Garcia & Congressman Lance Gooden.
“SEC Moving Toward Opening Private Markets to More Ordinary Investors”
On Wednesday November 20th the Securities and Exchange Commission (SEC) released their fall regulatory agenda which included an item to “reform the definition of who qualifies as an accredited investor eligible to buy non-public securities.” This connects to previous statements made by the chairman in which he would like to allow retail investors to buy private securities, which currently is limited due to income and wealth levels. Full article from Investment News on this development and the agency rule list for the fall from the SEC.
“South Korea Takes Legal Step to Stamp Out Unregistered Crypto Exchanges”
This development that happened on Thursday November 21st will force virtual asset exchanges to register with the Financial Services Commission (FSC). Failure to abide with this requirement would mean up to 5 years in jail or a fine of up to 50 million won. If this amendment passes, exchanges would have an easier time qualifying for “real-name virtual accounts.” This is yet another example of regulators stepping into the industry in attempts to make it safer for investors. Yahoo Finance article on this recent step made by South Korea to increase regulation.
“Silvergate Bank CEO Bets on Higher Crypto Price Volatility After $40M IPO”
CEO Alan Lane believes that since the crypto market is very volatile, it is that volatility that will lead users to increase their deposits with Silvergate. As he stated, “In our experience, it’s not so much about the absolute price of the asset, but rather the volatility in the price where we actually see potential changes in the behavior of some of our customers.” They recently engaged in an Initial Public Offering back on November 7th and raised about $30 million. It seems like their CEO is planning ahead for the next big crypto bull run. Yahoo Finance article on this statement by CEO of Silvergate Bank Alan Lane.
“In Wargaming Exercise, a Digital Yuan Neuters US Sanctions and North Korea Buys Nukes”
On Tuesday November 19th, former high-ranking U.S. officials participated in a wargaming exercise. This was a direct test to gauge the impact of when China releases their digital currency and how that would effect relations around the world. Currently the U.S. dollar is the global reserve currency and because of that it grants us a lot of power with economic sanctions, but if the Chinese digital currency became the global standard, a lot of the power would be shifted. This was an interesting take on how regulations both in the U.S. and around the world can have lasting impact on the global economy. The full exercise can be viewed on the Youtube video below.
That’s all for this week, check back in next week to learn all about what’s happening in the rapidly evolving digital securities industry! Feel free to leave any comments below & if you’re interested in following this weekly roundup be sure to click on “Notify me of new posts by email” underneath the comments box below to receive an alert for each new post.