BlackRock has been quietly building and advising across the digital asset spectrum. As the largest asset manager in the world, to the tune of $6T, they’ve built an internal digital asset team, published several crypto asset white papers, and have been closely advising Coinbase (and other crypto exchanges) for better than 18 months. When the term ‘institutional’ is used in the crypto ecosystem you could simply use the BlackRock logo in its place. They define the term in finance.

Take a look at the latest additions to the BlackRock movement in digital assets via Forbes:

“On Tuesday, BlackRock, the largest asset manager in the world with $6 trillion under management, said it would undergo a massive management overhaul, in part reorganizing to focus on alternative investments. And while BlackRock declines to comment on any plans for large forays into crypto assets, it recently hired former Ripple product marketer Robbie Mitchnick to its Digital Wealth team, which uses the firm’s successful Aladdin global asset management software to build institutional portfolios. Last summer, Mitchnick and Stanford Business School professor Susan Athey published a paper called “A Fundamental Valuation Framework for Cryptoassets,” which essentially laid out a sophisticated model for valuing cryptocurrencies bitcoin and XRP.”

These are some of the first public markers as to BlackRock’s serious interest and work with respect to Bitcoin and other crypto assets. And from what we are hearing, they’ve taken a unique interest in Bakkt’s pending launch and operations as well.

Once Bakkt launches they are considering a Series B round of funding and BlackRock has a legitimate interest in taking a piece of that round. Not that this is a surprise, but BlackRock is known for eschewing founding or Series A rounds and generally prefer later rounds that have evolved via the ‘proof of concept’ of any business.

That also assumes that any digital asset participation for institutional clients would include using Bakkt’s infrastructure to clear trades. While we’ve yet to get any solid confirmation on that, it does pass the sniff test.

Whatever BlackRock’s intentions are with respect to digital assets, the fact that they are formulating some level of involvement is extraordinary and only adds to the ‘institutional fomo’ narrative.

As always, with respect to firms like BlackRock and global investment banks, watch what they do, not what they say. Very, very interesting.

Bakkt continues to anticipate a pending approval from the CFTC to engage in the business of physically deliverable Bitcoin futures. The time and circumstances surrounding that approval has been a constant source of angst for those in crypto anticipating the heft that Bakkt will bring to the ecosystem.

While everyone waits (Bakkt included), CEO Kelly Loeffler posted an update via Medium. The update spoke specifically about the newly formed Bakkt board.

“We are charting a new course and it requires significant work, including by our Board, so I want to recognize our members. Chairing the board is Tom Noonan, a cyber expert and founder of numerous cybersecurity companies, including Internet Security Systems (IBM), JouleX (Cisco) and Endgame. Also joining me on the board are Jeff Sprecher, the Founder, Chairman and CEO of ICE and Chairman of the NYSE; Akshay Naheta, Managing Partner at Softbank; and Sean Collins, Managing Partner at Goldfinch Partners.”

Progress, if not slow and steady. One could make the case that announcing board members is a bit of a stop gap communication given the lack of visibility around when the CFTC may finally give them the thumbs up.

Still, this news coupled with a refreshed valuation approaching $1B, should fill the room for a short period. Maybe slow down the growing ‘When Bakkt’ memes.

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.¹ 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.²

The strict licensing requirements favor large virtual currency firms and financial institutions. The BitLicense application and licensing process are 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.³

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.⁴

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, cybersecurity, privacy, and information security procedures
• Prior written approval from the superintendent of the NYSDFS before the company introduces a “material change” to their business models, 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 BitLicense⁵

The application fee for a Bitlicense is $5000 and the applicant must complete a 31-page application form.⁶

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.⁷

Since the enactment of the rules, the NYSDFS has approved only eleven charters or licenses for virtual currency companies.⁸

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.⁹

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.¹⁰

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.¹¹

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.¹²

The report concludes that “virtual asset trading platforms have yet to implement serious efforts to monitor and stop abusive or manipulative trading.”¹³

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.¹⁴
• strong>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.¹⁵

Recommendation: We would advise new crypto firms to consider establishing operations in Montana, New Hampshire, Texas, Tennessee or Wyoming.

The information provided in this report is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney, financial advisor, or other professional to determine what may be best for your individual needs.

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This report was prepared by Trifin Roule.

For nearly two decades, Mr. Roule provided for the U.S. government legal analysis of anti-money laundering, counterproliferation financing and counterterrorist financing laws and regulations dozens of jurisdictions, and international standards, as detailed through intergovernmental bodies (e.g. Financial Action Task Force (FATF)), and financial institutions (e.g. banks’ financial intelligence units and compliance offices).

In addition, Mr. Roule has provided in-depth analysis of digital asset accounting, auditing, customer due diligence, exchange, licensing, mining, initial coin offering (ICO), private key storage, and record-keeping practices and regulations.

Mr. Roule is a former Assistant Editor at the Journal of Money Laundering Control, a peer-reviewed journal that provides detailed analysis and insight on the latest issues in the law, regulation and control of money laundering and related matters. Mr. Roule has published dozens of articles on anti-money laundering, and counterterrorist financing laws and regulations.

Trifin Roule is the Publisher of our new division, Abacus Legal, and his and his team’s reports will be free to read for the next 45 days. After that time they will be dubbed premium content and require a subscription.

---

1. “New York State Department of Financial Services, New York Codes, Rules and Regulations, Title 23, Department of Financial Services, Chapter I, Regulations of the Superintendent of Financial Services, Part 200. Virtual Currencies”.
2. In accordance with the New York State Administrative Procedure Act (SAPA), the final DFS rules for virtual currency business activity have been published in the New York State Register’s June 24, 2015 edition.
3. New York Codes, Rules and Regulations, Title 23, Department of Financial Services, Chapter I, Regulations of the Superintendent of Financial Services, Part 200: Virtual Currencies, §200.2(q).
4. New York Codes, Rules and Regulations, Title 23, Department of Financial Services, Chapter I, Regulations of the Superintendent of Financial Services, Part 200: Virtual Currencies, §200.2(q).
5. New York Codes, Rules and Regulations, Title 23, Department of Financial Services, Chapter I, Regulations of the Superintendent of Financial Services, Part 200: Virtual Currencies, §§200.4, 200.7.-200.19.
6. New York Codes, Rules and Regulations, Title 23, Department of Financial Services, Chapter I, Regulations of the Superintendent of Financial Services, Part 200: Virtual Currencies, §200.5; and “Application Forms For: License to Engage in Virtual Currency Business Activity,” New York Department of Financial Services at URL: .
7. New York Codes, Rules and Regulations, Title 23, Department of Financial Services, Chapter I, Regulations of the Superintendent of Financial Services, Part 200: Virtual Currencies, §200.3.
8. “DFS Authorizes Coinbase Global, Inc. to Form Coinbase Custody Trust Company LLC,” New York Department of Financial Services Press Release at URL: https://www.dfs.ny.gov/about/press/pr1810231.htm.
9. “The Ledger: Is New York’s BitLicense an ‘Absolute Failure?” Fortune, 25 May 2018.
10. “Virtual Markets Integrity Report – New York State Attorney General,” Office of the New York State Attorney General, 18 September 2018, p. 1.
11. “Virtual Markets Integrity Report – New York State Attorney General,” Office of the New York State Attorney General, 18 September 2018, pp. 5-6.
12. “Virtual Markets Integrity Report – New York State Attorney General,” Office of the New York State Attorney General, 18 September 2018, p. 2.
13. “Virtual Markets Integrity Report – New York State Attorney General,” Office of the New York State Attorney General, 18 September 2018, p. 5.
14. Bill No. S09013: Creates the 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, New York State Assembly website at URL: https://nyassembly.gov/leg/?bn=S09013&term=2017.
15. Bill No. A09899: Relates to financial technology products and services; establishes a regulatory sandbox program, New York State Assembly website at URL: https://nyassembly.gov/leg/?default_fld=%250D%250A&leg_video=&bn=A9899&term=2017&Summary=Y&Actions=Y&Committee%2526nbspVotes=Y&Floor%2526nbspVotes=Y&Text=Y.

Tether Limited (“Tether”), one of the most traded digital assets, has been under pressure for lack of transparency and concerns that it does not have the U.S. dollar (USD) holdings to fully back its tokens (“Tethers”) in circulation.

Since 2017, Tether has taken steps to re-insure investors. Each effort, however, only raised additional concerns.

According to data from CryptoCompare.com, more than 40% of all Bitcoins are currently traded on exchanges directly against Tethers¹; but the failure to alleviate these long-standing concerns could result in investors seeking better alternatives, namely stablecoins issued by regulated, audited, and transparent firms.

Some exchanges may also decide to move away from offering Tether trading pairs and adopt a rival, regulated stablecoin instead.

Tether’s Response to Industry Concerns

Tether responded to these concerns by stating on its website that “much of the speculation and negative reporting has been the result of misunderstandings of how Tether functions.”²

In addition, Tether’s website states that “(a)ll Tethers in circulation are fully backed by USD reserves”, and this has been “confirmed by “(m)emoranda, consulting reports, industry leaders, virtual currency pioneers, and competitors”.³

The company maintains a “Transparency” page that provides the current balances that Tether is holding in USD and euros (EUR) compared with the number of Tethers in circulation.⁴ Tether’s website also states that holdings are “subject to frequent professional audits.”⁵

Third-Party Attestations Issued, But With Significant Qualifications

Tether has supplied some evidence of its assets. Tether, however, has not produced a full assessment of its bank balances or a comprehensive attestation of its holdings by a professional, trusted third-party.

The most recent assessment of bank balances by a third-party was issued by Bahamas-based Deltec Bank & Trust Limited (“Deltec”). According to a statement released by Tether, Deltec accepted Tether as a client after a due diligence review that included an analysis of compliance processes, policies and procedures; a full background check of the shareholders, ultimate beneficiaries and officers of the company; and assessments of its ability to maintain the USD-peg at any moment.⁶

The statement also noted that Deltec reviews the company on an ongoing basis.⁷ It is unclear from the statement, however, when Deltec will conduct reviews or what the reviews will specifically assess.

Tether also released a letter, dated 1 November, from Deltec, which states that Tether has a portfolio cash value of $1,831,322,828.⁸ The reserve funds cited in the letter exceed the number of Tethers currently in circulation by more than $50 million.

The phrase “portfolio cash value,” however, implies that Tether may not be strictly complying with its own assertion that all Tethers in circulation are “fully backed by USD reserves”. “Portfolio cash value” could refer to various fiat currencies, virtual currencies, or, perhaps, short-term unsecured promissory notes.

The ambiguous letter, however, will not likely ease concerns from investors, as Deltec strongly qualified its findings. In the letter, Deltec states that the confirmation of reserves was made “without any liability, however arising, on the part of Deltec Bank & Trust Limited, its officers, directors, employees, and shareholders” and the confirmation was “solely based on the information” provided to the financial institution.⁹

Earlier this year, a three-page “Attorney-Client Communication/Work Product” prepared by Freeh, Sporkin & Sullivan LLP (FSS) was released by Tether. FSS reviewed bank account documentation and performed a randomized inspection of the numbers of Tethers in circulation and the corresponding currency reserves. FSS also reviewed the USD balances in accounts owned or controlled by Tether at its banks.¹⁰

The FSS report concluded that all Tethers in circulation as of 1 June 2018 were fully backed by existing USD reserves.¹¹

Like Deltec, however, FSS, significantly qualified its findings, The FSS report stated:

• FSS is not an accounting firm and did not perform the review and confirmations using Generally Accepted Accounting Principles.
• The confirmation of bank and Tether balances should not be construed as the results of an audit and were not conducted in accordance with Generally Accepted Auditing Standards.
• FSS makes no representation regarding the sufficiency of the information provided to FSS.
• FSS procedures were not performed for the purpose of providing assurance.¹²

The attestation has a few other additional limitations. The FSS findings are restricted to a single date-1 June- and do not confirm that each Tether was backed by a dollar for all points in Tether’s history.¹³ The FSS attestation also does not name any of the banks Tether was using to hold its reserve funds.

A September 2017 memorandum prepared the accounting firm Friedman LLP (“FLLP”) that is posted on Tether’s website is also problematic. The memorandum states that Tether had at least $440 million and €1,590 in various bank accounts.¹⁴

The memorandum, however, states that FLLP makes no representations about “whether the funds are committed for purposes other than Tether token redemptions”.¹⁵

The memorandum also redacts the name of banks where reserve funds are held, and the document is carefully phrased, so it is unclear if the Tethers are exclusively backed by USD reserves.

Tether’s relationship with FLLP was dissolved in January 2018 without a comprehensive audit being completed.¹⁶ Tether acknowledges that the services provided by FLLP “do not constitute an audit or attestation engagement, which would include a significantly expanded scope of procedures and take substantially more time to complete.”¹⁷

Unease over Tether’s Access to Banking Services

There have also been long-standing concerns over Tether’s relationships with banking institutions. These concerns will not be alleviated by Tether’s recent decision to select a bank in the Bahamas to hold its currency reserves.

A July 2017 Caribbean Financial Action Task Force (CFATF) report was highly critical of the Bahamas efforts to combat illicit finance activities. The scores for the Bahamas for the eleven “effectiveness ratings” are troubling. The Bahamas scored “low” in six categories, and “moderate” in five categories. The Bahamas did not receive a “high” or “substantial” score in any category.¹⁸

The report also specifically faulted the Bahamas for:

• Not providing law enforcement agencies with adequate resources to conduct investigations into illicit financial activities.
• Limited judicial action (e.g. prosecutions) against individuals suspected of committing illicit financial activities.
• The low number of suspicious activity reports filed, in particular in the context of the substantial size of the financial sector.¹⁹

The selection of a Bahmanian bank follows Tether’s previous banking relationship with Noble Bank International, based in San Juan, Puerto Rico, which ended earlier this year. Nobel Bank was audited by Puerto Rico’s bank regulator in 2017. The audit “raised concerns,” but the bank has not been “faulted publicly.”²⁰ The bank is currently for sale.²¹

Prior to its relationship with Noble Bank, Tether lost its relationship with its Taiwanese bank in early 2017 after Wells Fargo & Co. (“Wells Fargo”) ended its correspondent banking relationship with the Taiwan lender.²² This followed Wells Fargo’s decision earlier in the year to end its role as a correspondent bank through which customers in the U.S. could send money to Tether’s banks in Taiwan. Tether was the co-plaintiff with Bitfinex in a suit filed against Wells Fargo, but the plaintiffs withdrew the case.²³

Allegations of Market Manipulation

Authorities have not accused Tether of unlawful activity. There is possibly evidence, however, that Tether may have been used to manipulate the price of Bitcoin and other virtual currencies, according to a research paper released by the University of Texas at Austin.²⁴

The paper, written by Professor John Griffin and graduate student Amin Shams, alleges that Tether was a possible source of fraudulent buying demand that drove about half of the rise in Bitcoin in late 2017.²⁵

The researchers found that Tether issuances rose in 2017 during periods when the price of Bitcoin was dropping. When Bitcoin was rising, the same pattern could not be found. Once issued, nearly all Tethers were moved to Bitfinex and then shifted to other exchanges, where they were used to buy Bitcoin, propping up the price.²⁶

The authors contend that the findings may “provide substantial support for the view that price manipulation may be behind substantial distortive effects in cryptocurrencies”.²⁷

In a statement, Bitfinex and Tether Chief Executive Officer JL van der Velde said that “(Neither) Bitfinex nor Tether is, or has ever, engaged in any sort of market or price manipulation”.²⁸

In addition, an anonymously published statistical analysis of the issuance of Tethers, dated 24 January 2018, suggests that the timing of new Tether releases in 2017 was “closely aligned with notable dips in the price of Bitcoin”.²⁹

The anonymous report contends that that price data for 2017 suggests that Tethers may have not been minted independently of Bitcoin price and may have been created when Bitcoin was falling. One interpretation of the data suggests that “Tether could account for nearly half of Bitcoin’s price rise, not even allowing for follow-on effects and the psychological effects of rallying the market repeatedly”.³⁰

U.S. Regulatory Authorities Subpoena Tether

On 6 December 2017, the U.S. Commodity Futures Trading Commission (CFTC) sent a subpoena to Tether.³¹ Friedman LLP was also subpoenaed by the CFTC.³² According to Bloomberg, the CFTC is investigating whether Tether’s has the currency reserves to fully back Tethers in circulation.³³

Tether’s response to the subpoena was muted. A spokesman for Tether (and Bitfinex) said in a statement: “We routinely receive legal process from law enforcement agents and regulators conducting investigations. It is our policy not to comment on any such requests.”³⁴

Tether’s Response Motivated by Fear of Losing Market Share to Rival Stablecoins

Tether’s efforts to increase transparency are likely designed to blunt competition from four recently launched stablecoins that are also backed by the USD: Gemini, Circle, TrustToken, and Paxos.

The companies are substantially more transparent than Tether with disclosures of their holding entities, bank accounts, and regulatory compliance. The four new stablecoins, which are audited, regulated, and licensed, will provide more stability to the market.

Tether Should Increase Transparency to Ease Investor’s Concerns

Tether recognizes that its efforts enhance transparency are “unfinished” and it is taking “additional steps aimed at opening up Tether to the general public and clearing away any uncertainty that may exist.”³⁵

In the near-term, Tether could ease the concerns of the market by:

• Conducting regularly scheduled comprehensive assessments of assets and liabilities by a trusted third party, such as one of the “Big Four” accounting firms.
• Routinely updating information on its website that confirms existing relationships with financial institutions.
• Confirming existing relationships with virtual currency exchanges.
• Introducing strictly prescribed, predictable rules for the creation of new Tethers.
• Confirming the destruction of Tethers that have been taken out of circulation to ensure the tokens are not brought back into circulation in the future.

Tether fulfilled its initial promise for the virtual currency community, but its dominance will only continue if it provides investors with a high degree of transparency of their cash reverses, bank accounts, and regulatory compliance that approximates what is offered by rival stablecoins.

The information provided in this report is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney, financial advisor, or other professional to determine what may be best for your individual needs.

---

This report was prepared by Trifin Roule.

For nearly two decades, Mr. Roule provided for the U.S. government legal analysis of anti-money laundering, counterproliferation financing and counterterrorist financing laws and regulations dozens of jurisdictions, and international standards, as detailed through intergovernmental bodies (e.g. Financial Action Task Force (FATF)), and financial institutions (e.g. banks’ financial intelligence units and compliance offices).

In addition, Mr. Roule has provided in-depth analysis of digital asset accounting, auditing, customer due diligence, exchange, licensing, mining, initial coin offering (ICO), private key storage, and record-keeping practices and regulations.

Mr. Roule is a former Assistant Editor at the Journal of Money Laundering Control, a peer-reviewed journal that provides detailed analysis and insight on the latest issues in the law, regulation and control of money laundering and related matters. Mr. Roule has published dozens of articles on anti-money laundering, and counterterrorist financing laws and regulations.

Trifin Roule is the Publisher of our new division, Abacus Legal, and his and his team’s reports will be free to read for the next 45 days. After that time they will be dubbed premium content and require a subscription.

---

1. “BTC Volume by Currency,” 2018, https://www.cryptocompare.com/coins/btc/analysis/USD (accessed 5 November 2018).
2. “Transparency Update – FSS Report,” 2018, https://Tether.to/fss-report-transparency-update/ (accessed 5 November 2018).
3. “Transparency Update – FSS Report,” 2018, https://Tether.to/fss-report-transparency-update/ (accessed 5 November 2018).
4. “Transparency,” 2018, https://wallet.Tether.to/transparency (accessed 5 November 2018).
5. “Transparent,” 2018, https://tether.to/ (accessed 5 November 2018).
6. “Tether Banking Relationship Announced,” 2018, https://Tether.to/Tether-banking-relationship-announced/ (accessed 5 November 2018).
7. “Tether Banking Relationship Announced,” 2018, https://Tether.to/Tether-banking-relationship-announced/ (accessed 5 November 2018).
8. “Tether Banking Relationship Announced,” 2018, https://Tether.to/Tether-banking-relationship-announced/ (accessed 5 November 2018).
9. “Tether Banking Relationship Announced,” 2018, https://Tether.to/Tether-banking-relationship-announced/ (accessed 5 November 2018).
10. “Transparency Update – FSS Report,” 2018, https://Tether.to/fss-report-transparency-update/ (accessed 5 November 2018).
11. “Attorney-Client Communication / Work Product Privileged & Confidential,” Freeh, Sporkin & Sullivan LLP, https://Tether.to/wp-content/uploads/2018/06/FSS1JUN18-Account-Snapshot-Statement-final-15JUN18.pdf (accessed 5 November 2018).
12. “Attorney-Client Communication / Work Product Privileged & Confidential,” Freeh, Sporkin & Sullivan LLP, https://Tether.to/wp-content/uploads/2018/06/FSS1JUN18-Account-Snapshot-Statement-final-15JUN18.pdf (accessed 5 November 2018).
13. “Attorney-Client Communication / Work Product Privileged & Confidential,” Freeh, Sporkin & Sullivan LLP, https://Tether.to/wp-content/uploads/2018/06/FSS1JUN18-Account-Snapshot-Statement-final-15JUN18.pdf (accessed 5 November 2018).
14. “Memorandum Regarding Consulting Services Performed,” Friedman LLP, 28 September 2017, https://tether.to/wp-content/uploads/2017/09/Final-Tether-Consulting-Report-9-15-17_Redacted.pdf (accessed 5 November 2018).
15. “Memorandum Regarding Consulting Services Performed,” Friedman LLP, 28 September 2017, https://tether.to/wp-content/uploads/2017/09/Final-Tether-Consulting-Report-9-15-17_Redacted.pdf (accessed 5 November 2018).
16. “Tether Confirms Its Relationship with Auditor Has ‘Dissolved’,” Coin Desk, 27 January 2018, https://www.coindesk.com/tether-confirms-relationship-auditor-dissolved/ (accessed 5 November 2018).
17. “Transparency Update – FSS Report,” 2018, https://Tether.to/fss-report-transparency-update/ (accessed 5 November 2018).
18. “Anti-money laundering and counter-terrorist financing measures: The Bahamas ,” Caribbean Financial Action Task Force, July 2017, https://www.cfatf-gafic.org/index.php/documents/4th-round-meval-reports (accessed 5 November 2018).
19. “Anti-money laundering and counter-terrorist financing measures: The Bahamas ,” Caribbean Financial Action Task Force, July 2017, https://www.cfatf-gafic.org/index.php/documents/4th-round-meval-reports (accessed 5 November 2018).
20. “Puerto Rico’s Noble Bank Seeks Sale Amid Crypto Slide,” Bloomberg, 1 October 2018, https://www.bloomberg.com/news/articles/2018-10-02/puerto-rico-s-cryptocurrency-bank-noble-is-said-to-seek-sale (accessed 5 November 2018).
21. “Puerto Rico’s Noble Bank Seeks Sale Amid Crypto Slide,” Bloomberg, 1 October 2018, https://www.bloomberg.com/news/articles/2018-10-02/puerto-rico-s-cryptocurrency-bank-noble-is-said-to-seek-sale (accessed 5 November 2018).
22. “Bank Tied to Tether Goes Quiet on Relationship With Crypto Firm,” Bloomberg, 2 November 2018, https://www.bloomberg.com/news/articles/2018-11-02/bank-tied-to-tether-goes-quiet-on-relationship-with-crypto-firm (accessed 5 November 2018).
23. “There’s an $814 Million Mystery Near the Heart of the Biggest Bitcoin Exchange,” Bloomberg, 5 December 2017, https://www.bloomberg.com/news/articles/2017-12-05/mystery-shrouds-tether-and-its-links-to-biggest-bitcoin-exchange (accessed 5 November 2018).
24. “Cryptocurrency Tether used to boost Bitcoin prices, study finds,” Reuters, 13 June 2018, https://www.reuters.com/article/us-cryptocurrency-tether/cryptocurrency-tether-used-to-boost-bitcoin-prices-study-finds-idUSKBN1J92U0 (accessed 5 November 2018).
25. “Cryptocurrency Tether used to boost Bitcoin prices, study finds,” Reuters, 13 June 2018, https://www.reuters.com/article/us-cryptocurrency-tether/cryptocurrency-tether-used-to-boost-bitcoin-prices-study-finds-idUSKBN1J92U0 (accessed 5 November 2018).
26. “Cryptocurrency Tether used to boost Bitcoin prices, study finds,” Reuters, 13 June 2018, https://www.reuters.com/article/us-cryptocurrency-tether/cryptocurrency-tether-used-to-boost-bitcoin-prices-study-finds-idUSKBN1J92U0 (accessed 5 November 2018).
27. “Cryptocurrency Tether used to boost Bitcoin prices, study finds,” Reuters, 13 June 2018, https://www.reuters.com/article/us-cryptocurrency-tether/cryptocurrency-tether-used-to-boost-bitcoin-prices-study-finds-idUSKBN1J92U0 (accessed 5 November 2018).
28. “Cryptocurrency Tether used to boost Bitcoin prices, study finds,” Reuters, 13 June 2018, https://www.reuters.com/article/us-cryptocurrency-tether/cryptocurrency-tether-used-to-boost-bitcoin-prices-study-finds-idUSKBN1J92U0 (accessed 5 November 2018).
29. “Quantifying the Effect of Tether,” 24 January 2018, http://www.Tetherreport.com/ (accessed 5 November 2018).
30. “Quantifying the Effect of Tether,” 24 January 2018 at URL: http://www.Tetherreport.com/ (accessed 5 November 2018).
31. “One of the Biggest Crypto Exchanges Is Heading to the Caribbean,” Bloomberg, 24 May 2018, https://www.bloomberg.com/news/articles/2018-05-24/bitfinex-said-to-find-bank-in-puerto-rico-after-wells-fargo-exit (accessed 5 November 2018).
32. “One of the Biggest Crypto Exchanges Is Heading to the Caribbean,” Bloomberg, 24 May 2018, https://www.bloomberg.com/news/articles/2018-05-24/bitfinex-said-to-find-bank-in-puerto-rico-after-wells-fargo-exit (accessed 5 November 2018).
33. “U.S. Regulators Subpoena Crypto Exchange Bitfinex, Tether,” Bloomberg, 30 January 2018, https://www.bloomberg.com/news/articles/2018-01-30/crypto-exchange-bitfinex-tether-said-to-get-subpoenaed-by-cftc (accessed 5 November 2018).
34. “U.S. Regulators Subpoena Crypto Exchange Bitfinex, Tether,” Bloomberg, 30 January 2018, https://www.bloomberg.com/news/articles/2018-01-30/crypto-exchange-bitfinex-tether-said-to-get-subpoenaed-by-cftc (accessed 5 November 2018).
35. “Transparency Update – FSS Report,” 2018, https://Tether.to/fss-report-transparency-update/ (accessed 5 November 2018).

Morgan Stanley has seemingly been planning some sort of crypto initiative for longer than their clients can wait. According to sources at the global investment bank, clients (institutional and UHNW retail) have grown impatient with Morgan Stanley and ‘talk’ of crypto accessibility.

The sources discussed a small percentage of the client base keeps asking the firms bankers and brokers why they aren’t out in front in regards to crypto. Specifically, a straight line is being made by some as to Goldman Sach’s (it is well known in traditional finance that Morgan Stanley and Goldman Sachs are bitter rivals) consistent investments in the crypto ecosystem, BitGo and Circle, to name just a couple.

Those Goldman Sachs led investments position the firm to quickly scale up once the regulatory landscape is clear and defined. Morgan Stanley hasn’t made those any ‘in-kind’ investments that match Goldman’s and clients and brokers have been grumbling about it.

But there may be some hopes according to two sources that we spoke to at the bank. Morgan Stanley leadership is enamored with the path that Fidelity is taking and believe they can take the same path – and fashion it to be of interest to the firms largest institutional and UHNW clients.

“Are we behind? Yes. That really can’t be disputed at this point.” said our first source near the top of the communications org chart at Morgan Stanley. “But that won’t be the case once we commit to a particular strategy. We believe we are well positioned when the time is right.”

A second source closer to the broker ranks had this to say, “The word we hear is that leadership finds the Fidelity model for crypto appealing. And that could be the way it goes down here. Whatever strategy they choose, it needs to come quickly. We are getting asked about it daily. It does seem like clients that are aware of Bitcoin in particular see it as digital gold. That phrase has popped up often with UHNW clients.”

The digital gold narrative from uber-wealthy individuals and families is interesting. It means, if nothing else, that for those looking for Bitcoin information, the digital gold narrative is resonating.

“Clients that ask about crypto seem to be aware of Bakkt as well and question us as to our involvement and accessibility within their framework”, our second source described. “It is revealing what messaging seems to be making its way into these clients hands and sticking. Bakkt and digital gold seem to be moving in lock step – expect our firm (Morgan Stanley) to play along and once involved market it ($BTC) as such.”

Interesting conversations yesterday that reveal how traditional market players and dealing with the growth of Bitcoin and crypto at large. The bigger picture, that these firms have finally embraced, is that Bitcoin isn’t going away. And they are hell-bent on being there when mass investment follows an increase in awareness and adoption.