There was consensus among panellists that while the digital asset industry is moving in the right direction for institutional investment, there are some key areas that still require attention. Having said that, each speaker was also quick to point out the technologies we’re talking about change (and equally enable change) at such a rate that it actually makes it difficult for legacy institutions to keep pace.
It’s helpful the the SEC has said Bitcoin is not a security, though this falls short of providing an actual framework within which funds, service providers, and coins creators, can actually grow
The FCA has also been forward thinking, to the extent they’ve established various sandbox programmes to explore how crypto businesses can operate within regulated financial services. It’s also worth bearing in mind they are somewhat preoccupied at the moment with other matters (cough, Brexit). So 2019-2020 could yield much more productive output from the UK regulator, if the aim is to entice innovative blockchain businesses to British shores
There are a handful of smaller jurisdictions who’ve made great leaps forward (eg Switzerland), and even more (eg Malta) that have made crypto businesses much more welcome. Though whether that will ultimately be to their detriment remains to be seen
STOs and the future of ICOs was very much on topic, particularly following a discussion around the current regulatory environment in the UK and Europe. The panel again agreed that adopting a securitisation model from traditional finance, but building it on blockchain technology, will help both institutional investment, but also facilitate higher efficiency for regulators
Understanding custody has been a substantial barrier to entry for institutional investors, regulators, insurers, and just about anybody trying to understand how digital assets are stored
There are solutions coming to market now, which satisfy custodial requirements, even if regulators have been unable or unwilling to authorise them as yet
Part of the problem insurers have faced is that the risk associated with custody of digital assets is so different from traditional finance. But however steep the learning curve may be, there is a will and the premiums are high enough right now that there is certainly no lack of interest leading the way
2019 will be a turning point as more asset managers become aware of and learn best practice for crypto custody. The wall of institutional money will follow directly
Special thanks to George Morris and Sarah Crab at Simmons & Simmons for hosting the event with AIMA.
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