Crypto Club, Coinshares, and 2024 so far
Read on for industry updates from January and February, an interview with Daniel Masters of Coinshares, and further information on our next Crypto Club meeting in March.
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Industry updates from our Editor
10th January saw Spot BTC ETF’s gain approval in the USA. The SEC lost a lawsuit from Grayscale. The news has brought much celebration and jubilation. It almost took the crypto industry by surprise as speculation continued up until the decision with bets on a delay a no or a maybe. The bookies would have cleaned up.
So is this it? Is crypto normalised? Has all the rhetoric about crypto’s benefits for a decade or more been realised?
It is certainly a landmark ‘stake in the sand’ and bigger than bitcoin hitting $63,000. However, the industry is tentative having had chunks bitten out of it for years and relentless litigation in the USA and high profile, global arrests and prosecutions.
But don’t mistake this is one of the biggest moments in crypto history and with the halving predicted for 69 days: ordinals increasing miner transactions fees and MICA – European legislation in 6 months. It is time to break out the champagne.
The big names like Tim Draper still appear on Bloomberg but others are now taking their place – the TradFi big wigs.
A chat with Coinshares
To get some perspective on the latest changes, Citywealth Editor and CEO Karen Jones caught up with Daniel Masters, Executive Chair of Coinshares.
Coinshares bought out Valkyrie funds, Valkyrie had a Spot BTC ETF approved and many other smaller ETF’s in the crypto space. Their chairperson Leah Wald who is a long-term player in the sector has a high-level CV with much finance experience in Africa.
Daniel Masters said: “Coinshares had no reason to enter the USA market until there was an ETF approval. Valkyrie were an 8-year-old company who had built the foundation and done all the leg work. We had dealings with them before and a strategic option to acquire them in place. It made sense for all of us. It allows the capitalisation to develop the next stage of the business and Coinshares to be in the right place to benefit from this opportunity.”
Masters doesn’t see this as a welcome call for others to set up BTC ETF’s and cites gold as having only one big ETF even if there are other smaller ones. In fact, he says Wisdom Tree who are a significant $100bn ETF player in the USA and who had the approval has ended up with c$12million in the new fund. It means it is harder work than it looks and is not gold rush territory. He suspects some of the current players will disappear.
All this would not have happened if the SEC did not lose the Grayscale litigation to convert one of their funds to spot. Masters says: “It is a rare occurrence and is seen as a real enhancement to crypto as an investment,” Continuing he says, “Mica is 6 months away and is seen as another substantial finish line – where there is regulation then banks will follow”. This references the blanket ban on crypto banking and bank accounts that has best the market over the last year. As one member of the Citywealth Crypto Editorial Board said: “How can you comply with regulation if you don’t have a bank account?” Masters say it will also mean a jump in work to meet these changes. “We will need administrators, accountants, auditors and regulators as well as customers and providers.”
America may have approved the BTC ETF but with the tangle of crypto crime and prosecutions before this acceptance, it doesn’t look like a straightforward path for crypto companies still. It doesn’t wave a wand and sort the previous problems out. “It’s a half way house. ETF’s will have billions in them but no clear infrastructure to run a business” says Masters.
Of the FCA in the UK, he says this puts them seriously behind the curve for instance an SEC approved product is banned in the UK i.e. we cannot buy the BTC ETF product which makes little sense. Europe however he says has come good.
I ask about the decade long relentless debate about BTC price which has always dominated the talk in crypto. His conclusion is its history of quick money, so the price speculation is a sticking point whether true or not. He says he sees a $140k price for BTC based on Coinshares modelling and thinks it may stop there for good but adds that if BTC outperforms gold then this could change as investors shift asset types.
Masters says the next phase is distribution – reaching the customers to sell this product. He says this is where the low fee model only works for bigger distributors like Blackrock and Fidelity who have billions to switch in and who can access the market easily. Others distribution networks are through advisors which will need commissions. He adds: “the US retail stock market is very strong and the most vibrant in the world.” Suggesting much opportunity in this route.
He says despite ongoing detractors in the TradFi sector, with people like Larry Fink changing his mind on crypto it will make the negativity difficult to maintain.
Of custody, which is also the new big thing, he says there are not big fees involved and usually it is a route to selling other products for instance through a bank. He agrees that Coinbase will be the brand for US institutional custody.
So, what else is stirring the industry?
“Layer 2 Lightning network and Mercury wallet should be a pathway for BTC to be used as currency. Ordinals are boosting transaction incomes for minors which with the halving in approx. 70 days is crucial income.”
He finishes saying: “China has softened on crypto so let’s see what happens there. I wouldn’t count Binance out either. Now they have been sanitised and with their utter dominance as a crypto exchange they are one to watch for a rebound.”
Citywealth Crypto Club
Our next Crypto Club meeting is 19 March in London!
Membership applies but complimentary passes are available for qualified individuals. Become a member here.
Jonas Gantenbein, Head of Digital Assets at Bank Frick & Co in Leichtenstein, will be our next featured speaker. In 2018, Bank Frick became the first bank in Europe to offer blockchain banking.
Bank Frick was established in 1998 by the Liechtenstein fiduciary Kuno Frick Sr (1938–2017) together with a number of financial investors. Today, the Bank is owned entirely (100 per cent) by the Kuno Frick Family Foundation. Bank Frick employs over 200 members of staff in Liechtenstein and operates a branch in London.
“Bank Frick supports numerous classic financial intermediaries as well as fiduciaries and asset managers. These service providers are now also dealing increasingly with blockchain technology and are being approached about the topics of blockchain and cryptocurrencies by their clients. Bank Frick bring classic banking together with our blockchain banking, to offer financial intermediaries services from both worlds.”
Membership fees apply: https://www.citywealthmag.com/crypto-club/
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Karen Jones
Editor, Citywealth
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Notes from Citywealth Editor Karen Jones
Citywealth CEO and Editor Karen Jones provides her summary of top-of-mind trends and concerns seen in the wealth management industry today. She highlights ESG wins and woes, UK and US election unrest, succession politics, and more.