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Welcome to Crypto Long & Short! This week, Junfei Ren of Pando Finance forecasts that we’ll likely see SEC approval of the first U.S. bitcoin spot ETF by Jan. 10, setting off a bitcoin rally this year.
Then, Christine Cai and Sefton Kincaid of Cicada Partners argue that stablecoins can fix fundamental problems in today’s lending markets. As always, get the latest crypto news and data from CoinDeskMarkets.com. – Benjamin Schiller, head of opinion and features at CoinDesk |
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Bitcoin ETF Looks Very Likely Given These Bureaucratic SEC Steps |
Let's address the topic the crypto industry is obsessed with: I believe there is a 98% chance that a spot bitcoin ETF will be approved in the U.S. by Jan. 10.
Recent developments support that. The Securities and Exchange Commission has been meeting with potential issuers of these ETFs, even during the busy holiday season, to straighten up the final details, structure the creation and redemption procedure and guide issuers to incorporate the latest changes into their revised S-1 filings. BlackRock just filed its fourth amendment to its application with the SEC on Dec. 23 and is expecting to seed its bitcoin ETF with $10 million on Jan. 3.
Of course, seeding the ETF shell does not necessarily mean launch. |
But Fox Business reported that final amendments to all spot bitcoin ETF applications must be done by Dec. 29: “The applications that are fully furnished and filed by Friday will be considered in the first wave.”
The following indicates the SEC timetable of 13 prospective issuers: |
Source: Bloomberg
The SEC has requested that issuers have their authorized participant agreement – describing who will play the key role of creating and redeeming ETF shares – available in the coming days. Authorized participants are a central part of the ETF business, but this job will be a particularly tough one, with bitcoin ETF APs needing basic knowledge of digital assets and the ability to provide safekeeping and custody, conduct due diligence for anti-money-laundering and know-your-customer purposes, ensure compliance with sanctions regulations, deal and place crypto asset orders on behalf of clients, and so on. Not many traditional brokerages are well-equipped to do this. |
No authorized participants yet. Source: Bloomberg
It is obvious that the SEC wanted the ETF issuers to have at least conducted the preliminary chat with the market participants and sort things out – e.g. the assigned roles, operation flows, AP agreements – before formally granting the green light. For a brand new and groundbreaking ETF like this, it takes more than one mega-fund issuer to succeed; it is about the whole digital asset ecosystem and reciprocal teamwork. Wall Street is lucky to have Coinbase, which already white labeled a significant portion of their crypto user database from 2013 and its KYCed wallet addresses.
Meanwhile, in Hong Kong, the Securities & Futures Commission on the other hand is progressing with spot bitcoin ETFs in a more logical and conventional order. First, the SFC issued virtual asset management licenses, allowing fund managers with crypto experience to launch long-only private funds for high-net-worth individuals and institutions. Second, they issued a virtual asset exchange license on crypto trading platforms, letting retail clients to buy or sell bitcoin and ether.
Then, they offered traditional brokerage firms with qualified crypto backgrounds to upgrade the business scope to virtual assets as well, meaning those brokers can also provide crypto-related dealing and placing orders on behalf of their clients. This proper sequence of licensing provides the ground rules and makes a spot bitcoin ETF likely in 2024.
Bitcoin’s strength in 2024 should be well supported by themes like spot ETFs, the halving and a fall in real rates, according to Coinbase Institutional. The three combined factors will establish the basic fundamentals of 2024 and will push bitcoin and the crypto industry's entire market capitalization to all-time highs. |
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We were surprised too. Coalition Greenwich's research, sponsored by Amberdata, shows that the U.S. regulatory environment remains crucial for digital asset investors, but other locations like Dubai and Switzerland also garner support. Check out the report to learn more. |
Amberdata delivers comprehensive digital asset data and insights into
blockchain networks, crypto markets, and decentralized finance empowering
institutions with the critical data required to participate in digital assets. Trusted by Citi, Coinbase, Nasdaq, Franklin Templeton and more. |
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Stablecoins Can Help Fix the Current Lending Market |
Lending markets are evolving, transitioning from a traditional, bank-centric framework to a more diverse and technologically advanced ecosystem. This evolution is particularly evident since the Global Financial Crisis (GFC) and is fundamentally reshaping the landscape of capital aggregation and distribution. However, the current market structure still faces considerable friction. We believe, integrating blockchain into the existing financial tech stack will improve the efficiency of capital flows and expand access. Blockchain-enhanced capital distribution The diminishing role of traditional banks in capital distribution post-GFC has paved the way for fintech lending companies like SoFi and Ramp. These firms are filling the void with innovative solutions such as buy now pay later (BNPL) options by leveraging online platforms, data analytics and machine learning. Despite advancements, issues like archaic payment systems and SME funding gaps persist. Stablecoins can help overcome these challenges by revolutionizing fund disbursement with superior cost and speed. By leveraging stablecoins, fintechs can tap into new markets with limited access to conventional banking services, offering more accessible and efficient financial solutions at a global scale. |
The $150 trillion opportunity Private credit has flourished post-GFC, growing to $1.6 trillion and becoming a competitive source of large scale financing. However, compared with the state of innovation in capital distribution, capital aggregation’s growth historically was hindered by its manual processes and too many intermediaries, which made onboarding large numbers of smaller ticket LPs uneconomical. Tokenization can streamline and automate these intensive operational processes. Such efficiency brings two major advantages. Firstly, it is now more economically viable to underwrite smaller loans. Secondly, it democratizes investment opportunities, lowering barriers to entry for a broader spectrum of lenders, including those with smaller capital contributions often overlooked today. Other benefits include improved transparency, secondary liquidity, and simplified risk customization enabled by the programmability of smart contracts. According to recent research by Bain & Co, alternative investments are underrepresented in individuals' portfolios (individuals own 50% of global wealth but only 5% allocated to alternatives, while public pensions allocate about 25% to the same asset class). And while disparate liquidity demands and the highly manual nature of the alternative fund industry are barriers, Bain presents a clear case that tokenization can help the private markets industry tap into the $150 trillion individual investor segment, “unlocking.. potentially $400 billion in additional annual revenue for the alternatives industry.” Outlook for blockchain-based credit ecosystem |
| Expand the role of stablecoins in capital distribution: In 2023, companies like Visa, Mastercard, and Checkout.com integrated stablecoins with various applications. In 2024, we anticipate a broader adoption in global payments, encouraged by increasing regulatory clarity in jurisdictions such as Hong Kong and the UK. A key development in this area is stablecoin-based lending services. These services are expected to be particularly impactful in regions where traditional bank financing is inefficient or scarce. Tokenization in alternative asset funds: Over the past year, pioneers like Hamilton Lane and KKR adopted tokenization strategies to attract individual investors by reducing costs and lowering minimum subscription amounts. Looking ahead to 2024, we expect more private credit funds to explore the advantages of tokenization and optimize capital aggregation using blockchain technology while private credit lending solutions on DeFi continue to grow, addressing financing gaps in the real economy. |
In conclusion, blockchain technology, through innovations like stablecoins and tokenization, is pivotal in advancing efficiency and access to capital markets. |
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From CoinDesk Deputy Editor-in-Chief Nick Baker, here is some news worth reading: |
| CULTURE CLASH: Hopes are high that U.S. regulators will finally – Cameron and Tyler Winklevoss proposed creating one way back in 2013 – approve bitcoin ETFs soon. Just in case anyone is underestimating the potential: These products could dramatically broaden the investor base for bitcoin (BTC). Today, bitcoin is largely walled off from investors with normal, conventional brokerage accounts. Yes, some (like Robinhood) offer BTC trading. But not all. For that, you need an account at Coinbase or another crypto exchange. The Grayscale Bitcoin Trust isn't easy to buy. Purchasing shares of MicroStrategy provide exposure since Chairman Michael Saylor has loaded up the company's balance sheet with billions of dollars worth of BTC. But with an ETF, it will be just as easy for Americans to buy a bitcoin ETF as it would be to invest in Apple's stock. So, if many billions of dollars rushes into the market through the efforts of sales teams at Wall Street giants like BlackRock, what's that mean for crypto? Does this change the balance of power in bitcoin, somehow giving a greater voice to normies and traditional financial institutions, as opposed to the idealists who wanted to eliminate financial intermediaries with blockchains? That, to me, is one of the biggest unanswered questions facing the industry Satoshi Nakamoto kickstarted 15 years ago. JAMIE DIMON: I realize that CEOs don't necessarily love every last thing their companies do. They might have a personal distaste for a particular line of business, but realize there's money to be made so c'est la vie, let's do it anyway. And, yet, that can get into hypocrisy territory. JPMorgan Chase CEO Jamie Dimon is flirting with that. For years he's bashed bitcoin and crypto. A year ago he called bitcoin a "hyped-up fraud"! Last week, we learned JPMorgan is now embracing this hyped-up fraud, agreeing to take on the key authorized participant role for BlackRock's bitcoin ETF. Never underestimate the ability of profits to overwhelm convictions. |
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