The winds of change are coming for crypto.
Markets are quiet but don’t let low numbers fool you. We have entered a pivotal time for crypto and digital assets.
Firstly, the FTX trial is very necessary. The case needs to be public and high profile. Justice might be blind, but it needs to be visible. Retail investors have an opportunity to understand what the heck happened.
The industry has a chance to reflect on our own hubris during the last bull run. The red flags we all missed. Investors shouldn’t have to blindly rely on personalities when making core decisions, but on rigorous frameworks instead. The industry too. There is a need to purge, to rebuild post-bear market, into something stronger. It is my view that we’ve been languishing in the kiddie’s pool. The arm floaties are soon coming off.
Secondly, the short-term noise about price movements and volatility is a smokescreen. Crypto and digital assets are being absorbed by the mainstream. Michael Gronager CEO of blockchain analytics firm Chainalysis is quoted in Forkast describing half of all volume in value terms of the past year is in stablecoins. A mainstream asset. Not volatile, not crypto, but used within the crypto infrastructure. It doesn’t end there.
While we’ve been riding the waves of hopium, traditional finance has been kicking tyres on the technology. Global financial brands have observed what the tech can do, what the industry has built, what can be adopted and co-opted.
This week, BlackRock, the largest asset manager in the world, tokenised part of their money market fund. The tokens were then used as collateral in an OTC derivative transaction with Barclays bank. This was conducted on the JP Morgan Tokenised Collateral Network (TCN) which sits on their Ethereum-based Onyx Digital Assets platform.
JP Morgan talks about the tokenisation of private markets; double the size of public markets but far less liquid. Their view is tokenisation will unlock that liquidity alongside efficiency gains in transaction time and therefore, risk.
The combined assets of these three institutions, including those under management, are US$14.3 trillion. We are no longer in the kiddie pool folks.
Citibank have launched their ‘Token Services’ for blockchain-based cross border payments using real time settlement; Deutsche Bank and Standard Chartered Bank also recently announced crypto custody and tokenised assets for institutional clients.
Not all are ‘Blockchain not crypto’ either. Franklin Templeton, a global investment firm with US$1.53 trillion assets under management, has joined BlackRock and WisdomTree with their application for a spot Bitcoin ETF. Fidelity Digital Assets describes bitcoin as “a superior form of money” and as “an entry point for traditional allocators.” Bring on the pension funds.
All these developments propel crypto into the mainstream. Tokenising assets is the legal lens being used to frame regulation for our sector. That view means it cannot distinguish crypto from any other assets on-chain. This creates legal equivalency and in the minds of investors. That may not be the outcome some regulators wanted, nor some in the industry. Too late. That genie is out of the bottle.
CEO, BTC Markets