NOT NEW YORK: CRYPTO UNFRIENDLY: Why New York Won’t Be The Center Of Crypto Innovation And Leadership

New York, one of the first states to adopt virtual currency rules, has taken a relatively strict approach in the regulation of virtual currency activities. The rules, enacted on 24 June 2015, established a regulatory framework for virtual currency businesses that requires operations related to transactions involving any form of virtual currency to obtain a “Bitlicense” from the state.

The strict licensing requirements favor large virtual currency firms and financial institutions. The BitLicense application and licensing process is likely overly burdensome for small companies with limited access to capital and legal resources.

Overview of Bitlicense

Subject to certain exceptions, anyone engaging in any of the following activities is required to obtain a BitLicense from the New York State Department of Financial Services (“NYSDFS”):

• Virtual currency transmission

• Storing, holding, or maintaining custody or control of virtual currency on behalf of others

• Buying and selling virtual currency as a customer business

• Performing exchange services as a customer business

• Controlling, administering, or issuing a virtual currency.

Out-of-state businesses that engage in virtual currency activity involving New York State, or with persons within the state, must obtain a BitLicense to conduct their business.

Some of the regulatory requirements include:

• Minimum capital reserves

• Records of transactions must be kept for at least seven years

• Quarterly financial statements must be submitted within 45 days of the close of a quarter

• Background checks on all employees must be performed by an independent investigatory agency

• Appointment of a dedicated compliance officer

• Enforcement of written anti-fraud, anti-money laundering, cyber security, privacy and information security procedures

• Prior written approval from the superintendent of the  NYSDFS before the company introduces a “material change” to their business model, such as a new product or service

• Prior written approval from the superintendent of the NYSDFS before any merger with or acquisition of any company holding a BitLicense.

The application fee for a Bitlicense is $5000 and the applicant must complete a 31-page application form.

The one-size-fits-all” licensing process does not provide any exceptions for small virtual currency companies.

Application Approval Process Slow, but Improving

The 2015 rules do not impose a deadline on the NYSDFS for completing the licensing process.

Since the enactment of the rules, the NYSDFS has approved only eleven charters or licenses for virtual currency companies.

The license for Genesis Global Trading was not granted for nearly three years, and a license for BitFlyer USA, Inc. was not granted for over a year.

The number of licenses issued will likely increase over the next 12-24 months.

Focus Remains on Consumer Protection: The 2018 New York Attorney General Report

In September, the New York Attorney General (“NYAG”) issued a report that concluded crypto trading platforms vary significantly in their risk management strategies and in the ways they fulfill customer responsibilities.

The NYAG identified three broad areas of concern: potential conflicts of interest; lack of serious efforts to impede abusive trading activity; and limited protections for customer funds.

The NYAG also referred three virtual currency exchanges- Kraken, Binance and Gate.io-to the state’s financial regulator for possible legal action and raised concerns over price manipulation and conflicts of interest on trading platforms.

The report concludes that “virtual asset trading platforms have yet to implement serious efforts to monitor and stop abusive or manipulative trading.”

Draft Virtual Currency Legislation Introduced into the State Assembly

Virtual currency bills have been introduced in the State Assembly this year. New York, however, will not likely amend existing rules or introduce major virtual currency legislation until 2020, after the State Assembly is able to review a task force report that must be completed by December 2019.

Bill on the Creation of Virtual Currency Task Force: The bill proposes the creation of a digital currency task force to provide the governor and the legislature with information on the potential effects of the widespread implementation of digital currencies on financial markets in the state. If passed, the bill would establish a group consisting of nine members which would be called on to submit a report to the governor, temporary president of the senate, and the speaker of the assembly by December of 2019. Additionally, the task force would be required to provide the number of digital currencies and exchanges operating in the state, information about large investors in the field, and the energy consumption necessary for coin mining operations. The task force would also provide a review of laws and regulations on digital currency used by other states, the federal government, foreign countries, and foreign political and economic unions to regulate the marketplace.

Bill on Virtual Currency: The bill proposes eliminating the BitLicense and licensing fees. In addition, the bill mandates that any virtual currency business or entity be subject to routine audits by a public or third-party depository service. Any entity in full compliance will receive a digital New York Seal of Approval to reassure consumers that the outlet is trustworthy and secure.

JP MORGAN CHATTER: BAKKT INFRASTRUCTURE: JP Morgan Eyes Bakkt (And ICE) Infrastructure ​As Easy On-Ramp​ For Crypto Exposure

Bakkt has set out to create a product that appeals to institutions in a way that other crypto exchanges and firms have yet to do – ultimately, trust.

Trust in the pricing process. Trust in the custody construct. Trust in the warehousing facility and deliverables. Trust in the narrative that Bitcoin (futures) will be handled on Bakkt’s systems in the same way that gold, silver, and oil futures are handled on their legacy global commodities exchanges. Exchanges where trillions of dollars of transactions change hands on a yearly basis (yes, that is trillions with a T).

The connection that JP Morgan is making with Bakkt is relatively simple – they trust the team, they trust the systems, they trust the history of Jeff Specher, Kelly Loeffler, and ICE. They transact billions in commodities trades on ICE systems already. They trust that Bakkt will be as efficient and transparent as those systems.

And that is exactly the narrative that Bakkt is selling as they talk to potential institutional clients and those that onboard early. Bakkt can be trusted, because ICE and the NYSE can be trusted.

JP Morgan (and more specifically Jamie Dimon) doesn’t want any sort of negative Bitcoin headline given his level of questions surrounding the asset. As stated a couple of months ago, he just “doesn’t want to talk about it.”

But that doesn’t mean several teams at one of the world’s largest banks aren’t preparing to treat Bitcoin like the commodity that the CFTC has dubbed it as, and trade it via Bakkt’s architecture. It is the one name that gives them a level of comfort that they find legally acceptable.

How visible these banks of scale will be with Bakkt from the outset will be very interesting to watch. Bakkt strategically announced themselves with partners like Microsoft, Starbucks and BCG. Massive names that add trust as a backdrop to whatever narrative lives inside the halls of JP Morgan.

One JP Morgan trader took a few moments to give us a little color on how they see and talk about Bakkt:

“Bakkt is the only place we’d approach Bitcoin and the crypto space. Any and all other ‘set ups’ just don’t rise to the legal standard that is acceptable risk for us. Bakkt is the only place that passes that test. Whether we are there as soon as the door opens, or window shop for a few months, it is the only name we are considering in terms of client funds finding their way into crypto.”

It doesn’t surprise us that firms of scale will be cautious with Bakkt and the volume with which they ‘dip their toes in’. Executives will have to get comfortable seeing line items on P&L spreadsheets with the term ‘Bitcoin’ on them – when just a year ago global investment banks were all decrying $BTC as the devil.

Financial markets are constantly evolving, though, and Bakkt seems uniquely positioned to capitalize on the idea of Bitcoin as digital gold. That is the thesis that Bakkt’s roster of All-Star investors believes.

We will find out soon enough.

BAKKT: BEHIND THE PENDING LAUNCH: Faced With An Unexpected Delay, Bakkt Prepares Massive Roll Out And Marketing Blitz

Bakkt has been the talk of the crypto water cooler for nearly six months now. Conversations about it being a “bear market buster” abound, and it just may be. But it has to be approved by the CFTC before that can happen. And as of today, the lights are a bit dim in CFTC offices in Washington, DC – per the US government shutdown.

But that reality isn’t slowing down the inner workings of Bakkt, its staff, and the teams built around the global commodities exchanges controlled by Intercontinental Exchange. The ‘buzzing’ that can be heard amongst those connected to the Bakkt launch is loud and growing. Work is being done and preparations are in full gear.

The clear expectation is that CFTC approval will follow shortly after the reopening of operations at the CFTC following the end of the shutdown. And the Bitcoin initiative known as Bakkt, partnered with Microsoft and Starbucks, will launch like a rocket.

Take a step back and consider the huge venture capital names committed to Bakkt at the moment. A few names connected to their first round of funding read like an All-Star team of sorts: Fortress, Galaxy Digital, Horizon Ventures, M12 (Microsoft’s own venture fund), and a host of others.

The investment is not necessarily a play on Bakkt trading volumes or the price of Bitcoin, but rather on adoption and daily use that Bakkt plans on pursuing. Here is a portion of that case stated by Maria Smith, Vice President, Partnerships and Payments for Starbucks:

“As the flagship retailer, Starbucks will play a pivotal role in developing practical, trusted and regulated applications for consumers to convert their digital assets into US dollars for use at Starbucks. As a leader in Mobile Pay to our more than 15 million Starbucks Rewards members, Starbucks is committed to innovation for expanding payment options for our customers.”

In other words, the play for flagship institutional investors is not the volatility associated with Bitcoin, but rather the real world application of it when you walk into Starbucks and order a Grande Cordusio. With a swipe of a finger and a push of a button, Bitcoin is deployed and used for purchase at one of the largest retail chains in the world.

So what is happening today as Bakkt prepares to launch an entirely new asset into the commodities space?

The Bakkt team is working furiously as they prepare for a marketing and execution blitz that they believe will produce tremendous volumes and attract all manner of institutional clients very, very quickly.

One source familiar with Bakkt’s preparations had this to say about what they expect once CFTC approval occurs:

“Take a close look at the increased public dialogue that Bakkt is having with the crypto and financial community. Whether it is a Medium post by Kelly (Kelly Loeffler, CEO of Bakkt) or social media posts meant to continue to build a Bakkt narrative, the PR and marketing ramp up is preparing for launch and all that comes with it.”

“Once launch occurs you can expect Bakkt leadership to be all over the airwaves and in front of TV cameras preaching the Bakkt gospel. And that can be characterized as the safety, custody, and daily use case ecosystem that Bakkt provides to investors. Kelly is uniquely qualified to tell that story and will be a media darling.”

More color on where Bakkt is headed once approval is finalized from sources we spoke with familiar with the firm. The Starbucks initiative is a 2020 project and will be carefully talked about in conjunction with reps at the behemoth coffee company. ‘Message discipline’ will be important with respect to Starbucks so as not to fall into the trap of overpromising and underdelivering.

At launch much more will be made of Bakkt’s familial connection to ICE and their technology partnership with Microsoft. Those will be highlighted early and often as they are trusted names amongst institutional investors and global investment banks.

Further, you can expect Bakkt to be more an more visible at larger financial and technology conferences of note. Also expect the Bakkt message to be spread in the largest of media organizations like the Wall Street Journal, New York Times, CNBC, Bloomberg and the like. Bakkt wants to build a lock-tight institutional seriousness around digital assets and the safety they plan to provide to investors. They believe keeping messaging to legacy outlets will send that message.

Messaging, optics, partnerships, adoption, safety, real-world use cases, ICE, Microsoft, Starbucks, and ‘more digital asset products to come’. Maybe Bakkt is the bear market slayer we all hope it to be?


NOVOGRATZ: Crypto Adoption Needs Regulatory Clarity And Institutional Acceptance To Go Mainstream

Mike Novogratz is both a crypto paragon and a Wall Street insider. He’s been in both camps over the course of his career. Now famous for his 2017 Bitcoin and Ethereum price calls (that were significantly exceeded, even though some called him crazy at the time) he’s been making the rounds at crypto conferences across the globe discussing digital asset adoption and where the industry could go next.

His current thesis sounds something like this, speaking at the Beyond Blocks conference in South Korea: “You won’t see mass adoption until the user experience does not feel like something new and that is still five to six years away.”

Novogratz explained that one of the major obstacles on the way to widespread adoption is the increasing “cost of technical talent” as well as the doubts of conventional investors, which are aggravated by “no clear precedent for the financial industry”: “Think about how institutional investors operate. It’s hard to tell your boss ‘I have money in places you have never heard of.’ You need a trusted, name custodian — a Japanese bank or HSBC or ICE or Goldman Sachs — to allow institutional investors to feel comfortable.”

The investment banker noted the importance of due diligence and proper regulation across a multiplicity of governments, as well as urging the mainstream public to get into blockchain and crypto, adding that it is not necessary for users to understand the tech in detail.

Novogratz further clarified stating that mass adoption would find its way to the masses once standard bearer institutions had adopted cryptocurrency standards and practices: “Think about how institutional investors operate. It’s hard to tell your boss ‘I have money in places you have never heard of.’ You need a trusted, name custodian — a Japanese bank or HSBC or ICE or Goldman Sachs — to allow institutional investors to feel comfortable.”

These comments aren’t a surprise as the likes of Novogratz and Tyler and Cameron Winklevoss continue to work with governments and larger institutions to adopt some level of standardized regulations.

The regulatory hurdles remain somewhat steep and are the chief concern of some of the largest crypto funds and firms anticipating joining the fray.

One notable ray of light is the SEC adding digital assets to its 2019 priorities for review and, presumably, action. Of course, the current US government shutdown isn’t helping them speed up the process.

Whether or not standardized regulations would lead to higher prices for cryptos is a completely separate discussion. As it stands, and as Novogratz postulated, we are several years away from both global regulation and institutional adoption.

EXCLUSIVE: ESTONIA: Over 1100 Virtual Currency Licenses Approved in 2018

The Estonian Financial Intelligence Unit (FIU) issued 529 virtual currency wallet service provider licenses and 595 virtual currency exchange service provider licenses in 2018, according to an e-mail received by Abacus Legal from the FIU.

The FIU estimates that the majority of the licenses were issued to foreign businesses. In addition, the FIU estimates that the majority of the firms applied for and received approval for both types of licenses simultaneously. 

Few Applications/Licenses Rejected or Revoked by the FIU

In 2018, the FIU rejected 24 virtual currency wallet service provider applications and 34 virtual currency exchange service provider applications. The FIU did not provide the reasons for the not approving the applications. Estonian law permits the rejection of applications if the applicant fails to submit the necessary documents or a member of the management body, procurator/agent, beneficial owner or owner was convicted of a criminal offense.

The FIU also revoked 12 wallet service provider licenses and 17 exchange service provider licenses.The FIU did not provide the reasons for the revocation of the licenses. Estonian law permits the revocation of a license if the applicant intentionally submitted incorrect information; the firm repeatedly fails to follow the precepts of the supervisory authority; or the firm has not commenced operation within six months.

Legal Certainty and Location Independent Business Practices Attract Virtual Currency Firms

Virtual currency companies find Estonia an ideal jurisdiction to conduct business for a wide-array of reasons. Estonia is one of the few European Union (EU) member states that have enacted legislation to explicitly regulate virtual currencies. This has provided virtual currency businesses with a high degree of legal certainty. 

The ease of establishing a company through the e-residency program, minimal documentation requirements for the licensing of a virtual currency firm, and expeditious licensing process also provide foreign businesses with a favorable domicile to establish an EU-wide presence.  

Draft AML Legislation Will Increase Operating Costs

Foreign virtual currency firms considering establishing a presence in Estonia should take into account an AML bill currently being drafted. The draft law imposes additional licensing requirements; requires firms to enhance customer due diligence procedures; and extends the application review process from 30 days to as much as six months.   

The draft law also requires companies registered in Estonia to have their place of business and head office in Estonia and companies not registered in Estonia are required to establish a branch in the country.   

After the legislation is enacted, a virtual currency firm that already has a license will be given six months to meet the new requirements. The FIU will revoke a firm’s license if it does not meet the requirements in six months. 


BAKKT BONUS: ACQUIRES ASSETS BEFORE APPROVAL: Bakkt Acquires RCG Assets To Bolster Platform Ahead Of CFTC Approval

Bakkt isn’t resting on its parent company laurels and hoping that the ‘largess’ associated with ICE will bring institutional customers by the buckets full. Instead they are continuing to smartly acquire customers via acquisition as well as staff – as per a Medium post made by their CEO, Kelly Loeffler.

Via Medium:

“To advance that effort, I’m pleased to share that we have entered into an agreement to acquire certain assets of Rosenthal Collins Group (RCG), an independent futures commission merchant with nearly 100 years of earning clients’ trust. In December, RCG announced the sale of all its customer accounts to Marex Spectron, one of the world’s largest commodity brokers. As part of that transaction, our aim was to purchase certain valuable assets related to developing our platform. We expect to close the transaction in February, and are excited to welcome members of the RCG team to Bakkt.”

“How does this advance our work? First, it will enhance our risk management and treasury operations with systems and expertise. Other aspects of the transaction will contribute to our regulatory, AML/KYC and customer service operations as we help enable digital asset acceptance by bringing more choice and control to buyers and sellers.”

“This acquisition underlines the fact we’re not standing still as we await regulatory approval by the CFTC for the launch of regulated trading in our crypto markets. Our mission requires significant investment in technology to establish an innovative platform, as well as financial market expertise to deliver the most trusted fintech ecosystem for digital assets.”

It is not entirely clear what Bakkt has really purchased here, other than mention of ‘customer accounts’ in the dialogue above. That would be an interesting move to drive scale upon launch and provide the markets with volume from day one on their platform.

The staff that comes along with the acquisition will be on interest as to how many were acquired, who stays, and who does not.

A note (as we always do when reporting on Bakkt) as to what Bakkt is set to launch, and why it is seen as a potential bear market buster:

“Bakkt is designed to enable consumers and institutions to seamlessly buy, sell, store and spend digital assets. Formed with the purpose of bringing trust, efficiency, and commerce to digital assets, Bakkt seeks to develop open technology to connect existing market and merchant infrastructure to the blockchain.”

“As an initial component of the Bakkt offering, Intercontinental Exchange’s U.S.-based futures exchange and clearinghouse plan to launch a 1-day physically delivered Bitcoin contract along with physical warehousing on December 12, 2018, after receiving CFTC review and approval. These regulated venues will establish new protocols for managing the specific security and settlement requirements of digital currencies. In addition, the clearing house plans to create a separate guarantee fund that will be funded by Bakkt.”

GOLDMAN SACHS: OTC WHALES: Goldman Sachs Has Been Handling Billions Worth Of OTC Trades; “Buy-side volume in 2019 is increasing…”

Goldman Sachs hasn’t been exceptionally coy about their involvement in the crypto markets. Specific to Bitcoin, from a volume standpoint, Goldman Sachs is one of the (if not THE) largest facilitators of OTC trades in the world. They routinely generate more than a billion in OTC trades on a quarterly basis; if the numbers given to us for Q4 are accurate.

Lending credibility to the belief that UHNW individuals, family offices, hedge funds, and other financial entities of scale are trafficking in Bitcoin. Buying, selling, holding in cold storage, wallet to wallet – Bitcoin is increasingly a vehicle for wealth ‘store of value’ in an uncertain global economy.

Speaking with two sources at Goldman Sachs who are facilitators in the OTC markets and aware of Goldman’s ability to broker transactions – it is clear that Bitcoin has begun to resonate with investors as ‘digital gold’.

One source had this to say: “Understand that Goldman banks a huge portion of UHNW families that trust the firm to make the right calls. Those families have seen Goldman invest in Circle and other Bitcoin-related firms and are increasingly comfortable with the digital currency. The narrative that is ‘bitcoin is digital gold’ has begun to take hold in the minds of investors. This has led to increased volumes late in 2018 and throughout the beginning of 2019. And if the global economy continues to soften, expect those volumes to continue to increase.”

The second source we spoke to over the weekend said the following: “OTC volumes have increased across the board. Global economic uncertainty and a ‘flight to safety’ now includes Bitcoin. That is why you are seeing an increase in volume year over year, and again to start 2019. Goldman is a MAJOR player here. They’ve got ‘first mover’ privileges at Circle, because of their equity stake in the firm, so they are more effective from a pricing standpoint than other large bank facilitators. Their clients know this and it breeds confidence in the firm as a safe place to funnel investment dollars into digital assets.”

Several media outlets have published OTC volumes ranging in the billions on a daily basis and the feedback amongst those ‘in the know’ regarding Goldman’s involvement would echo those numbers.

OTC trading has begun to significantly outpace exchange volumes as larger investors (whales) increasingly prefer to trade with a perceived air of invisibility, while avoiding pushing the markets one way or the other.

Speaking to a crypto focused firm in New York late last week they commented on the strength of their $BTC OTC operations and its growth over the past 90 days. Specifically, increased volume on the buy-side.

And it isn’t just UHNW individuals doing the buying. Shadow crypto trade desks at firms like State Street, Morgan Stanley, etc are buying $BTC in volume as well. They are simply stopping short of drafting press releases to tell the world about it.

As the tail of the bear market lengthens, smart money sees $BTC as an accumulation opportunity. Don’t be surprised, once the regulatory framework in the US is sufficiently clear if these firms begin to disclose the breadth and depth of their involvement in the crypto space.

It may surprise all of us.


WINKLEVOSS PREDICTION: BITCOIN BETTER THAN GOLD: “Bitcoin is better at being gold than gold…”

The Winklevoss twins are currently running an aggressive campaign to build awareness among the masses with respect to crypto and Bitcoin. Whether it is a billboard, NYC streetside signage, or a ‘crypto bus’ pacing the streets of Manhattan – they are determined to spread their message.

A message that has served to annoy some in the crypto community. The Winklevoss twins assertion that crypto desperately needs regulation to matter seems to be the anti-thesis of the foundation of Bitcoin itself. Still, they continue undeterred and focused on bringing their message to a larger and larger audience.

Since launching their regulated US cryptocurrency exchange and trading platform Gemini, the Winklevoss twins have staked huge amounts on Bitcoin’s success, despite opening up trading of larger market cap altcoins. This puts their campaign under a microscope and into some perspective.

Their thesis, in an interview earlier this week, is that Bitcoin most closely resembles gold. Going so far as to say that “bitcoin is better at being gold than gold. Bitcoin is certainly the OG crypto! It’s hard to defeat network effects — so in terms of ‘hard money’ (i.e., store of value) Bitcoin is most likely the winner in the long term.”

Whatever your reaction happens to be to their ‘crypto is better when it is regulated’ campaign – the Winklevoss twins hold enormous influence within the crypto space. Their Gemini exchange is a leader in OTC volume and people listen when they speak. Thousands attended their Reddit AMA and headlines were made.

Very few in the crypto ecosystem carry that kind of influence. The question one might ask, though, is this – does their influence push Bitcoin and crypto in the right or wrong direction? Is regulation really the answer?

Whether they are right or wrong could either position them to gobble up market share or leave them chasing for what may remain. Interesting nonetheless.

BANK OF AMERICA, WELLS FARGO: RIPPLE ENGAGEMENT: Bank Of America/Wells Fargo Sends Reps To Engage Ripple Leadership; Payment Systems Partnership Discussed

Something is brewing between Ripple Labs and a couple of massive financial institutions. Why and what you might ask? They keep finding themselves in the same rooms together, meet up after meet up, conference call after conference call, and discussion after discussion – all surrounding payment systems that these institutions are considering implementing.

Both Wells Fargo and Bank of America continue to have discussions with Ripple representatives concerning payment processing technology and potential partnerships.

Other banks and financial firms have discussed the same with Ripple: MUFG Bank, WestPac, Standard Chartered, Banco Santander, American Express, Siam Commercial Bank, and SBI. Clearly, Wells Fargo and BofA would be the biggest names and ‘get’ for Ripple Labs as of yet.

Still, from that above group, headliners being Bank of America, American Express, and Banco Santander – who all possess global presences and brands of scale, are partners that any crypto brand would love to add to their client list. Ripple has obviously rolled out the red carpet for these brands and made a commitment to doing whatever is necessary to partner with them.

Ripple continues to make other announcements that have been highlighted over the past couple of months connected to their ever developing payment systems.

Ripple has confirmed the launch of xRapid, a cross-border remittance solution built on the top of Ripple’s proprietary blockchain, last month. The announcement had caused an abnormal bull run in XRP price action, bringing its value up over 100 percent in just a week. The excitement, however, dried off as long position holders began to exit their position on new intraday highs, causing a selloff.

Some of the biggest companies have already nodded to test Ripple xRapid system on their frameworks. These companies include names like MoneyGram, Western Union, Mercury FX, and Cambridge Global Payments. An excerpt from the Ripple website:

“xRapid is for payment providers and other financial institutions who want to minimize liquidity costs while improving their customer experience. Because payments into emerging markets often require pre-funded local currency accounts around the world, liquidity costs are high. xRapid dramatically lowers the capital requirements for liquidity.”

The speculators are expecting these announcements to continue and remain a catalyst for $XRP price action throughout this year. The team announced that it will launch the system in October of last year (which did actually happen), but the actual date of its commencement remains unclear. Unclear or not, having Bank of America and Wells Fargo in the room discussing anything with you is meaningful. Very meaningful.

To the extent that Bank of America, Banco Santander and others will use Ripple’s product line once is it launched and available for daily client and customer transactions also remains to be seen. But there aren’t a dozen cryptocurrency and blockchain firms having these kinds of conversations and building this type of architecture.

In fact, you could count on one hand the other blockchain/crypto firms that are involved, to this serious depth, not only building use case products but actually on the precipice of executing those exact use cases.

While some in the crypto community may scoff at Ripple’s ambitions and the way they go about their announcements, there is real substance involved. Bank of America and Wells Fargo don’t send reps to just anywhere for a nice cup of coffee – they don’t need to based on their reputation and scale.

We expect more and interesting announcements to occur throughout the rest of 2019. Should they rise to the level of actual news and use case seriousness, we will bring it to you.

**To be clear, we are not saying that final conclusions to these talks are imminent and about to be announced. Rather, the inclusion of these firms in any discussions with a cryptocurrency firm is newsworthy. Let’s see how these ‘meetings’ develop and what does, or does not, come of them.

CRYPTO ETF CHATTER: FIDELITY, GOLDMAN SACHS, BLACKROCK: 2019 Is The ‘Genesis’ Of The Crypto Structured Product

At some point, a Bitcoin ETF application is sure to be approved. But that isn’t the talk around water coolers (or via text and social media DM’s) at places like the CBOE, CME, NYSE, and global financial institutions. Each of those organizations is sure that an approval is coming and are preparing the infrastructure for the onboarding of any and all new crypto money.

The talk has quickly turned to the next set of crypto ‘structured products’ that could flood the market in 2019. All manner of ETF’s connected to other cryptocurrencies and ‘baskets’ of alt-coins are coming. And it won’t stop with just ETF’s.

One conversation was illuminating with a source from Gemini: “We’ve got months worth of backlog that is waiting for the first approval. Some of the biggest institutions in the world have crypto products prepped and ready to hit the markets. We expect 2019 to be a year of accelerated adoption.”

A former CME executive echoed those sentiments: “Some of our clients are not only locked and loaded with ETF products, but there are a second set of firms that are set to service and market those products that will indirectly benefit from a succession of crypto-based approvals. This really is the push that seems to be moving the markets as it is on the tip of everybody’s tongues at the moment. That first approval will open the floodgates. In six months the first ‘Bitcoin ETF’ will look like a dinosaur to crypto investors. And the regulation that will be attached to any structured products like this will gather massive amounts of institutional assets.”

A Goldman Sachs source confirmed the 2019 narrative: “2018 has been about building out the legal/regulatory and custody architecture that creates a level of comfort for clients. 2019 will address adoption and investment directly.”

Read the pages of this site or any crypto-based publication over the past month and you can see *clear-eyed* the pent-up demand from all sorts of well-known names, individuals, and institutions, for the right crypto product. Those massive amount of dollars are there for the taking.

First movers in the space will take advantage and reap huge benefits. Names like BlackRock, Fidelity, Goldman Sachs – all of them have current ‘working groups’ connected to digital assets. You can bet that each of them is ready to pounce when the regulatory framework finally takes shape.

Institutions are serious and poised to shovel client cash into cryptos, finally. The moves by Bakkt, Fidelity, ErisX (and by extension DRW), TD Ameritrade, Yale and Harvard endowments over the past 45 days prove that the architecture is nearly finished and lift off is imminent.

There is zero, ZERO chance the above organizations make the moves and spend the capital to build what they are building without a seriously good faith understanding of what regulators will and will not do. That isn’t how ‘high finance’ works.

Not only is a Bitcoin ETF coming, but a flood of crypto-based products will quickly follow.