There have been a number of interesting announcements around the use of Digital Assets with some interesting products and companies receiving the green light from regulators.
In Europe, we have seen a Luxembourg-based business called Argento emerge and, from the UK, The London Block Exchange has launched what it calls “the world’s first genuine bitcoin (BTC) bond”. This new bond being issued by LBX, which is regulated by the UK FCA, will enable institutional investors to buy a bond that has no exposure to fiat currencies. It will have its own International Securities Identification Number (ISIN) code, and its price will be on all Bloomberg terminals i.e. another example of Crypto being adopted and accessible to institutional managers.
In the UK, Token Market, which had been very active promoting Initial Coin Offerings, raising over £240 million for 30+ companies funded by 170,000 investors, has had approval from the FCA to issue its own Security Token Offering (STO). The Token Market STO goes live on 8th July 2019 and will pave the way for Token Market to launch further STOs - all of which will be subject to much greater regulatory scrutiny, compared to 5,597 ICOs that have been launched to date. Once again pioneers like Token Market, offering STOs in a regulated manner, will make it easier for institutions to be more engaged with this asset class - not least because these Digital Assets will be backed by assets i.e. bonds, property, shares in companies.
In February 2019, the London Stock Exchange invested into a UK-regulated company called Nivaura, which has now issued both digital bonds and equities using Blockchain technology. Euronext, a Dutch-based stock exchange that has over 1,300 companies listed with a market capitalisation of over €3.5 trillion, has invested €5 million into Tokeny, which is based in Luxemburg. This investment in Tokeny will compliment Euronext’s investment in Liquidshares, where it joined a consortium of 15 other organisations. Liquidshares is a post-trade Blockchain-powered solution, connecting asset managers’ and broker and custodians’ information systems, thus enabling them to more easily invest in and process listed and non-listed European SMEs.
However, the regulators are also showing some signs of caution, with the UK FCA announcing that it wanted to ban the sale of “Crypto derivatives” to retail customers. It is understandable that the FCA has taken this stance, as crypto derivatives are a highly-geared way in which to get exposure to, in this case, an unregulated asset – Cryptocurrencies. While many have generated high returns, Cryptocurrencies are themselves very volatile. Furthermore, the Cryptocurrencies which largely have been created via an ICO are typically not listed, nor traded, on regulated exchanges. However, as we see more STO’s being launched which can be admitted onto regulated exchanges, such as Token Market, it will be interesting to see if the FCA allows derivatives on these Digital Assets.
Meanwhile, in the USA, there has also been some caution and concerns being raised in particular about Facebook’s new Libra-Cryptocurrency, with the House of Democrats asking Facebook to halt developments until the regulators and congress have had the opportunity to review the potential risks. This is unlikely, as Libra has been established in Switzerland, which is...