TradFi has realized crypto as a solution
Reputable companies are entering into the crypto space to better utilize what innovative ideas have been produced in this budding space
Bitcoin Block 796,126
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When honey leaks out of the hive, everyone rushes to get it. You don’t have to be a bee to value that honey. Humans are the largest demand drivers and they don’t care if they have a stinger on their back or not. The honey is sweet and it’s dripping. Catch it while it’s shiny. There is no doubt in the fact that something happened in 2009 that has stirred our views on the modern financial system. Technology cannot be undermined and the manifold opportunities and diverse ways it has introduced us to are limitless.
What we need is a global reset. The world won’t shift onto a new monetary system and abandon the one that has an inflated trust score. In addition, the people in power that have benefitted from the atrocious working of it will always lobby against any innovation stifling their suction of riches. Previously, this occurred during the World Wars, and a power shift is seen. Fund managers and the wealthy elites trap the everyday individuals into bond investments which if analyzed with real rates in mind, lead to a compounding loss. Then why own such bonds that seem to decrease your purchasing power over time? Well, the US government says so, and considering their dominance in financial engineering, we have to do what we are bound to. The safest capital, or better to call it “the presumed safest capital” is all we have.
The US is no longer a dominant exporter of tangible goods. Now, it exports financial engineering and can cater to all types of investors. The highest amount of billionaires and millionaires reside in the region and have hefty cash to throw at you. Every party interested in the capital will please these investors. All is merry in times of loose monetary policy. It gives a false sense of trust in the financial networks. However, when all these good times prevail, someone has to pay the price. Inflation is the demon in the fairytale feeding on jolly Americans who are a bit too happy with their country’s influence. When people see their portfolios die down against this demon, they demand a change of tactic from their portfolio managers. On the other side, they are bound by regulatory pressures to keep US bonds afloat. Hence, they restrict access to assets that have deflationary price dynamics like gold, bitcoin, and other high-performing assets. In addition, the authorities restrict the exudation of capital by clamping down on companies providing these facilities. This has been seen in the lawsuit against Coinbase and Binance.
The SEC’s take on crypto exchanges is clear: They are flouting the law as unregistered stock exchanges
But are the SEC and other regulatory bodies setting the stage for familiar companies to rule this revolutionary space as well and giving them a head-start in this area?
Speculation once again
The market is always forward-looking. The recent spike we have seen in Bitcoin’s price action is fueled by all the retail speculation for the inflows of capital that might be seen once the giants of TradFi have established their hegemony in the crypto industry.
The first notable announcement is the founding of EDX markets, a non-custodial digital asset platform that provides exposure to five well-known cryptocurrencies to date. Its backers include major traditional firms like Charles Schwab, Citadel Securities, Fidelity Digital Assets, and Sequoia Capital, alongside Paradigm and Virtu Financial. Now, this isn’t your everyday exchange like Coinbase and Kraken which starts working with simple steps of account formation. First of all, it is only available for institutional and accredited investors. Second, it is non-custodial so it is a service where settlement is not done on-spot and the custody service, for example, Fidelity is responsible for holding your assets. Not your keys, not your coins! Does that ring a bell?
The BEAST
Next is the filing for a spot Bitcoin ETF by BlackRock. The second largest asset manager being among the top owners of big-tech companies and having close to $10 trillion in assets under management is now in the news for doing something crypto-native companies have been struggling in a head-on collision with the SEC. The retail investors are pricing in the inflow of capital that will result from this. BlackRock has filed for multiple different ETFs in the past and filing this one must have been a decision well thought of. The people at the top consider it feasible and have research backing the decision. It is not like BlackRock’s management sits down every day to discuss crypto. They think it is a technology here to stay and has been tested in the market for a while now.
Where concerns emerge is the largest company, owning a stake in many influential businesses is now entering into crypto. Bitcoin is indeed free from central control. But it is also important to recognize that it stands for financial inclusion and independence. Custody will be provided by BlackRock. This stands against the ethos of what Bitcoin is meant to be. Above all, how come BlackRock feels confident in filing an ETF whereas crypto-native companies like Gemini have had a decade struggling for an ETF but have only been met with defeat? The SEC is a cunning regulator. Competition won’t subside like this and few players will end up catching major market share.
The organizations that are adamant about developing censoring technologies such as digital IDs, 15-minute cities, and social media blockades are now interested in crypto.
Favoritism at its best
Flattery is the answer, play the game by appeasing your opponent and you’re bound to win. Prometheum is tantamount to this. After becoming an SEC-registered alternative trading system in October 2022, it has now gained the status of the first regulated crypto custodian in March 2023 having approval from Financial Industry Regulatory Authority. Leave Coinbase, Kraken, Gemini, and Binance and we’ll give this privilege to some company that nobody has heard of, nobody has been familiar with and is not 100% transparent. Yes, we are the regulators and we have our logic.
Prometheum’s co-founder and co-CEO Aaron Kaplan in his testimony in front of the U.S. Financial Services House Committee on June 13 has a pro-SEC stance and deems existing regulation fit to regulate cryptocurrencies. the same regulation that has stifled crypto adoption and blockchain innovation in the US, Prometheum considers it ideal for exchanges as new laws will expose investors to unlawful practices. The same laws that can’t even decide which coin or token is a security and are more than 80 years old tackle the existing financial landscape. This is where we are when it comes to regulatory frameworks in the US.
You can’t even trade Bitcoin and Ethereum on the exchange as gaining the regulated custodian status does not allow it to exchange assets that are disputed as them being securities or not. So that is another process of listing assets that have gained approval. Indeed a hassle and this exact thing has led to reputable exchanges fleeing from the country that has been known for supporting innovative ideas. Competition breeds creativity. That is missing.
No one is left, and the boat is jam-packed
And then we have the announcement that has sent shockwaves across crypto Twitter: Peter Schiff using the Bitcoin blockchain to prove the authenticity of his NFTs!
https://twitter.com/PeterSchiff/status/1662210584178475008?s=20
This comes as a surprise as Peter has been one of the top vocal critics of cryptocurrencies deeming them useless and a complete waste of resources. However, this inscription of his NFTs has shown otherwise. Bitcoin provides private authentication of user assets and does that in a completely decentralized manner. This use-case has led him to accept the upper hand crypto has here.
The challenges we face
The dual accounting system that is quotidian in present-day financial transactions poses friction and hampers instant settlement and throughput. According to Mark Yuko, the CEO of Morgan Creek, this friction costs us $7 trillion which is 6-8% of the global GDP. Companies are flocking to crypto because they realize this flaw and are profit-driven. The risks have been high in the past but after the technology has been time tested, the major players in the financial realm have started realizing its potential. Now obviously integration of the blockchain networks into traditional financial networks will be a gradual process but a direction has been set.
What is important is keeping the ethos of cryptocurrencies alive and acting in favor of collective interests. The large corporations won’t do that so resistance and healthy competition from the underdogs are pivotal in establishing crypto as the nrew frontier.