Circle: which institutions are in crypto and what’s next?
In 2018, there were tangible developments in the arena of institutional crypto, with a wave of new entrants in the market, including financial and tech incumbents, according to research from Circle, a global crypto finance company backed by $140 million in venture capital from investors including Goldman Sachs, IDG Capital Partners, Breyer Capital, Baidu.
Derivatives, Indices, Trusts:
- Existing: CME/CBOE Futures (2017), Citi DAR, GBTC Trust,
Bitwise Hold 10 Index, HODL ETP
- Pending: Nasdaq, Bakkt (ICE), ErisX, CoinFLEX BTC futures
ETF Proposals: Van Eck/SolidX Bitcoin ETF, Bitwise Bitcoin
Custody: Fidelity Digital Assets, Coinbase Custody, Kingdom Trust, BitGo
Endowments: Harvard, Yale, MIT, Dartmouth, Stanford, UNC
Incumbents: Square, Robinhood, Facebook, Amazon
While interest is high, institutions still face key challenges around investing and offering services in crypto:
- Regulation: The global regulatory landscape is nascent. Most regulators have not shared a clear framework and regulate on a case by case basis.
- Compliance: The crypto environment is hailed for its anonymity, but this makes it difficult to verify identity and risk profiles to be compliant with KYC/AML rules.
- Education: Institutions need education on the new risks involved with dealing in crypto assets and measures needed to protect against these risks.
- Security: Many crypto trading venues are not up to retail trading standards, let alone institutional. While the underlying technology is secure, the infrastructure that allows us tto interact with it is nascent (though is evolving).
The market downturn has led to the revelation that this technology is still in its very early stages and that the economic growth of the crypto market in 2017 did not match the nascent underlying activity and adoption.
But it’s important to recognize that the pullback was necessary, and that after the last year, the value proposition of Bitcoin and other crypto assets is stronger.
Over the next year, expect to see strides made in addressing scalability, security, and interoperability challenges, improvements in user experience, an increase in institutional interest as institutional-grade infrastructure goes live, greater regulatory clarity, and experimentation with the tokenization of new and existing, tangible and intangible assets.
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