Expect problems bringing crypto products to market
The current valuations of cryptocurrency are too high to be sustainable and other problems mean it will be difficult to bring a regulated product to the market, according to Aequitas Investment Partners.
Rowan Stewart, Aequitas joint chief investment officer, said: “It is hard to believe cryptocurrencies will become recognised as a store of value for their own sake. Precious metals and gems have thousands of years of history behind it and Bitcoin does not. We would regard the current valuations as far too high to be sustained.
“The current valuation of the major cryptocurrencies is extremely high given the lack of current practical uses and the ease of creating new currencies.”
Problems with the cryptocurrencies included the slow processing time, high transaction costs, inability to control all transactions, an anonymous nature which contradicts ‘know your client’ and anti-money laundering rules, and huge energy costs. Currently, Bitcoin exchanges could process about three transactions every second worldwide compared to 1,700 a second by Visa in the US.
Referencing the Australian Securities and Investments Commission (ASIC) consultation findings, Stewart said it would most likely apply to Bitcoin and Ethereum but that other currencies lacked enough support to be viable yet.
ASIC wanted to ensure there was a high level of institutional support for the crypto-asset, experienced service providers, a mature market for the spot-asset, regulated futures markets and robust and transparent pricing mechanisms.
“We’d say that for the more mature cryptocurrencies like Bitcoin and Ethereum there is enough of a market to attract support from service providers and investors to satisfy these criteria, but not for most others at the moment,” Stewart said.
“Anecdotally, crypto developers have told us that a lot of the legal work with new products is trying to design them so they sound enough like a currency or financial product to attract investors without meeting enough of the legal definitions of financial products to make them regulated.”
BetaShares, VanEck and Monochrome had all announced plans for a spot-based Bitcoin exchange traded fund.
AUTHOR
Laura Dew
Recommended for you
Fund managers may be operating in a squeezed environment, but a salary guide shows they are willing to pay up for specialist talent to diversify their fund range.
Reach Alternative Investments has entered into a strategic partnership with Russell Investments to bolster its wholesale private markets offering for financial advisers and investors.
Boutique investment consulting and research house Genium Investment Partners has announced a senior appointment to drive further growth in its research ratings business.
Nuveen has appointed a global head of estate, a successor to Chris McGibbon who steps down after almost 25 years.
