Where to For Bitcoin? – Trustnodes

Where to For Bitcoin?


Bitcoin fractals art

Newsrooms are buzzing with reporters rushing to find the latest big name in banking and finance to announce a crypto related service or purchase.

It’s astonishing looking at it all years after we thought such day would come.

We’re witnessing a global transformation in finance at its very early stage still, a transformation that in some ways goes beyond the wildest speculations even just a few years ago.

Yet bitcoin’s price seems quiet. It is tired in some ways after an intense year, with cryptonians seeing one of the lowest point in March and now at the doors of all time high.

It’s as if the crypto is stoping to reflect a bit. Are we really doing this? What are the grandpas saying? Can’t China be saved?

The latest Financial Stability Oversight Council (FSOC) that includes the US Treasury, says in its annual report:

“Financial innovation can offer substantial benefits to consumers and businesses by meeting unfulfilled or emerging needs or by reducing costs, but it may also create new risks and vulnerabilities.

For example, there has been an increase in the number and type of digital assets with many increasing in value.

Much like traditional assets, digital assets can also be subject to operational and counterparty risks that could prove disruptive to users and the digital asset ecosystem as a whole.

In addition, financial firms’ rapid adoption of fintech innovations in recent years may increase operational risks associated with financial institutions’ use of third-party service providers; if critical services are outsourced, operational failures or faults at a key service provider could disrupt the activities of multiple financial institutions or financial markets.”

Paxos now wants to be a bank too. Standard Chartered Bank is to launch crypto trading. A German bank Bankhaus von der Heydt (BVDH) is to issue a euro stable coin. Another launched a bitcoin and ethereum fund.

Australia’s challenger bank Gallantree is rolling out bitcoin buying and selling for businesses, while one of Asia’s biggest bank is doing it for institutional investors.

JP Morgan has completed a live, blockchain-based intraday repo transaction with the system expected to go in operation next year, while Bitwise lists the first cryptocurrency index fund on OTC markets, developing a 2x premium.

Twitch’s Shaan Puri has moved 25% into bitcoin, while MassMutual buys $100 million of it with MicroStrategy potentially buying $500 million.

This is the tipping point of bitcoin going mainstream as an investment asset. It has only begun, but it appears with some speed as no one wants to be left behind.

After tipping their toes last year, some are now rolling out the carpet. Some have even gone full in.

Something has happened because the crypto space now is high end finance. Sophisticated, utterly cool, and even luxurious.

It’s the aspiring new challenger outside of the stuffy traditional towers. It doesn’t even say how things should be done, it just does its own thing and others look and see this digital money.

New Finance

“While I am not privy to what is directly being considered, I am aware of the fact that the administration, including Treasury FinCEN, are working towards new rule-making that would effectively attempt to ‘plug a hole’ by significantly constraining how financial intermediaries can interact with public blockchain networks, via so-called unhosted or self-hosted wallets…

The kinds of approaches I’ve heard that are being discussed would be taking a sledgehammer to a problem that needs precision tools and could materially curtail the much more significant potential for public blockchains to transform many industries.”

So says Jeremy Allaire of Circle in a letter to the Treasury. He sounds perhaps even panicky. Yet there is little reason to think that this space can grow further to scale without some sort of regulation of intermediary entities like Circle or Coinbase.

You obviously can’t regulate the protocol itself, or SPV wallets which are no different than the open source bitcoin code. You can however potentially regulate just how much information you get from compliant intermediaries, like Coinbase, just how much surveillance you apply.

The proposed regulations are only rumored, so we can’t pass judgment, but they appear quite unlikely to affect the vast majority of cryptonians who already are AML-ed and KYC-ed on Coinbase and other exchanges.

The passing of any such regulation through diktat, moreover, is a further indication of the erosion of liberty in America, and thus you’d think would make something like bitcoin even more appealing.

That’s because bitcoin is in may ways of the middle class, and the middle class is by and large law abiding, playing by the rules, so there’s nothing any law can do to them.

Any regulation in fact would be good for bitcoin because then it would be regulated, it would have the stamp of the Treasury, and thus the middle class can continue to enjoy their own financial system as they see wages stagnating in real terms since the 70s in the other system.

The involvement of highly regulated banks moreover would naturally lead to some considerations of whether crypto regulations would be required as these are very new things making their way into the financial system.

Thus we have these two worlds where institutional investors are entering this fast growing new space while bureaucrats are wondering what they can or should do about it.

And then you have China where the banned bitcoin for now six years is thriving, proving you can’t ban it.

This parallel trajectory has been with bitcoin since the beginning. Skeptics on one side, and the bitcoiners on the other, with the latter increasing by the number as every halving passes.

Just as these debates with regulators have been going on for years, and usually they’re a sign bitcoin is ready to grow more.

Not least because it’s the first time in centuries that a new asset class has been created by the digital revolution, an asset class that is now being integrated into wider finance.

Comments (1)

  1. Great analysis! Good conclusion. As far as I know “Revolut” should be launched in the US. For private customers…

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