Sibos 2022: State Street Digital Roundup

The third edition of State Street Digital Digest focuses on the recent market volatility around cryptocurrencies, which has been popularly dubbed this summer’s “crypto winter,” which had a negative impact on the influx of new investors into the space. .

The latest State Street Digital Digest is now available

In addition to the opinions of our own experts, in this issue we present the perspectives of our client, Fideuram Intesa Sanpaolo Private Banking. Other topics explored in Digital Digest include regulatory trends in cryptocurrencies, governance in decentralized finance networks, the potential to distribute digitally tokenized assets via ETFs, and the growth of stablecoins.

Here, we outline the key takeaways from the latest State Street Digital Digest:

  1. Investing in Bitcoin is becoming more long-term

Entities, individuals, or institutions that have net bought Bitcoin this year are long-term buyers (such as entities that have bought, cumulatively, at least three times as much Bitcoin as they have sold). Data from Glassnode shows that these investors now own 78% of the Bitcoin supply. This is the highest turnout in five years and is a marked change in behavior from the crash of 2017/18, when long positions capitulated.

  1. Asset manager experience also points to increased long-term interest in cryptocurrencies

Fideuram COO Riccardo Negro offers his perspective on the rise of institutional interest in Bitcoin, Ethereum, and other cryptocurrencies. “We see many institutional investors who decide to buy cryptocurrencies and hold them for a long time, to diversify the portfolio. And although the price of Bitcoin indicates a period of consolidation for the crypto market, I see crypto assets playing an important role in the future of the institutional portfolio,” he says.

  1. International Organizations Unite Around Global Cryptographic Standards

In July, the Financial Stability Board (FSB), an international body made up of finance ministers and central bank governors from the G20 countries and beyond, as well as organizations that have an important role in global financial stability , issued a “Declaration on International Regulation and Supervision of Crypto Asset Activities.” The statement emphasized following a path of “same activity, same risk, same regulation” when addressing crypto asset activities, expressed support for the timely implementation of the standards and noted the need to adopt regulations to address financial stability risks arising from crypto assets, in particular stablecoins.

  1. Ethereum merger is here

Ethereum, a blockchain platform used for crypto asset transactions including its own cryptocurrency Ether, has recently engaged in a governance model change. “Ethereum 2.0” limits voting rights to approved validators, rather than all successful Ether miners (a change known as “proof of work” to “proof of stake”), who must own at least 32 Ether and They will only have equal voting rights up to a maximum of 32 Ether, regardless of how many they own. There will also be a system of sanctions for improper voting.

  1. ETFs will benefit from blockchain technology

ETFs are poised to become a preferred fund-based wrapper for retail investors seeking access to private markets and other illiquid alternatives, through digital fractionation. It is already the fastest growing fund type of the last decade and its existing advantages in terms of liquidity and low fees will remain in a digital asset fund environment. Exchange-traded products are also at the forefront of existing use cases for blockchain in fund management. They make up 46 of the 73 funds globally, with assets under management of approximately $70 billion, either holding crypto directly or trading crypto futures.

  1. Stablecoin growth is bringing regulatory challenges

According to analysis by State Street Global Advisors, stablecoin regulation and integration will give a big boost to the growth of decentralized finance, with macro policy implications. The main question for regulators regarding stablecoin regulation is whether to create a new set of regulations or adapt existing banking or securities regulations. They expect lawmakers to treat stablecoins under securities regulation similarly to money market funds. Specific rules will aim to ensure standardization, limit systemic risk and increase protection for investors and households.

Read the full digital summary here.

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