Daily Update — June 7, 2018

June 7, 2018

Today’s daily update, featuring Coinbase’s institutional progress and classic trillion dollar shilling from Mr. Novagratz.

Coinbase announces they are “on track to become a US-regulated blockchain securities trading venue”.

After their recent unveiling of a suite of institutional-level financial products, Coinbase announced today that they are “on track to operate a regulated broker-dealer, pending approval by federal authorities.”

  • I don’t think Coinbase would make a public announcement like this if they weren’t fairly certain that the SEC and FINRA are on their side. Similarly, Coinbase wouldn’t spend millions of dollars on R&D for their institutional products if no one would be able to use them.
  • The announcement also suggests that Coinbase is interested in listing more SEC-approved crypto assets in the future. Currently, the majority of PoS ERC-20 tokens in existence can be classified as securities. NEXO is one token that claims to be SEC-compliant. Crypto assets that use a PoW consensus algorithm with no premine (BTC, LTC, XMR, etc.) are also not being scrutinized by the SEC.
  • Coinbase also stated that they “envision a world where we may even work with regulators to tokenize existing types of securities.” Okay, they definitely wouldn’t say something like this if they didn’t have some kind of positive support from the government.

Mike Novogratz, CEO of Galaxy Digital Capital Management, claims institutional money is preparing to move into the cryptocurrency market.

In an interview with Bloomberg, Mike Novogratz made a very bold claim — institutional money is hungrily waiting on the sidelines, and the crypto market will hit $20 trillion USD before the bubble bursts.

  • The term “institutional money” is intentionally vague. In my opinion, institutional-level money has already been in the game for a long time, but not for the same reasons as retail investors. Instead of creating value and nurturing the market, I think the current class of institutional investors are in the business of extracting as much value as they can before regulations come into play.
  • This statement comes at an interesting time. Back in March, Coinbase announced Coinbase Asset Management and the Coinbase Index Fund. This product, which requires a minimum investment of $250,000, is only open to accredited investors in the USA. I’d consider $250,000 to be institutional-level money, albeit on the lower side. More recently, Coinbase revealed more about it’s institutional suite of blockchain-based financial products. Institutional this, institutional that. I think institutional something is coming.
  • Yesterday, Jay Clayton, the chairman of the United States SEC, made a statement saying BTC is not a security. I suppose we all knew this already, but it’s nice to get some clarity on the issue. On the other hand, Clayton made it seem like ETH and XRP are now being considered as securities. I think the SEC needs to stop evaluating new asset classes with established rules. In the past, there were no assets that could be classified as what we now call “utility tokens” now. ETH and XRP are required for the utility of their respective networks. The rules need to be changed.


Find me on Twitter, or email me.