Crypto News: September 7, 2018

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Wall Street is going all-in on crypto.

As I suspected yesterday, reports that Goldman Sachs was shuttering their crypto trading desk were misinformed. CFO Martin Chavez spoke at TechCrunch Disrupt and stated (1) the bank realizes it may take longer to enter the market than originally anticipated and (2) the need for an institutional-grade custody solution is top of mind.

Here are the two quotes:

"When we talked about exploring digital assets [...] it was going to be exploration that would be evolving over time. Maybe someone who was thinking about our activities here got very excited that we would be making markets as principal and physical Bitcoin, and as they got into it they realized part of the evolution but its not here yet."

"Physical bitcoin is something tremendously interesting, and tremendously challenging. From the perspective of custody, we don't yet see an institutional-grade custodial solution for Bitcoin, we're interested in having that exist and it's a long road."

This clarification from Goldman’s leadership is important because it reiterates what I have been saying — Wall Street banks are quickly embracing crypto as they enter an arms race to capture millennial investors who have an unusually high percentage of their networth in digital assets.

In fact, a recent survey showed that nearly 50% of millennials are interested in moving away from the US dollar and primarily using a cryptocurrency. The same survey showed that 44% of millennials believe that cryptoassets will continue to gain further adoption as well. Remember, these digital natives grew up with smart phones in their hands and have become reliant on digital financial services like Venmo, Wealthfront, and SoFi. It shouldn’t come as a surprise that they are looking to convert all asset ownership (stocks, bonds, currencies, and commodities) to a digital format.

Goldman Sachs is not the only Wall Street bank that is paying attention to this trend though. BlackRock has been talking with Coinbase about a potential partnership to launch a crypto-based ETF. Collaboration between legacy asset managers and large crypto companies is a unique (and potentially winning) strategy that should appease both crypto enthusiasts and regulators simultaneously.

As more financial institutions realize the shifting trend of asset digitization, we should anticipate an inflection point in products, partnerships, announcements and acquisitions. While some traditional organizations will successfully navigate the changing landscape, the majority is likely to be disrupted in a painful way.

The days of hard-charging, human-led Wall Street banks are over. The financial giants of tomorrow will be technology companies optimized for a global, digital world. Crypto-first companies have the first move advantage. Legacy financial institutions are waking up.

Things are about to get very interesting.


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Security tokens get a boost as PayPal alum joins 0x board: The founders of 0x, an open protocol that underpins token trading, announced an alliance with Harbor, a compliance service for tokens that’s backed by the former COO of PayPal, David Sacks. The move is significant because it helps to create an industry standard for security tokens, making it easier for investors and software developers to adopt them. Read more.

Grayscale makes $6.3 million bet on cryptocurrency Zen: Grayscale Investments, the company behind the Bitcoin Investment Trust, is creating a new fund whose sole focus is on Horizen, a little known platform that hosts a currency called Zen. The investment is notable because some large institutions rely on Grayscale’s funds to own cryptocurrency, and because of the privacy focus of Horizen. Read more.

Former Homeland Security official joins crypto startup Circle: Circle Internet Financial has announced the hiring of a former U.S. Department of Homeland Security official as its chief legal officer. Former DHS acting general counsel Gus Coldebella will oversee all of the firm's legal, compliance, regulatory and government affairs in this capacity. Read more.

IBM makes another blockchain identity play with health data: IBM's blockchain division is widening its work in the nascent field of "self-sovereign identity" – technology designed to give individuals greater control over their personal data. The tech giant is working with, whose #My31 app just became available on iOS and Android mobile devices. The app's name alludes to the idea that legal ownership of one's data should be a "31st human right" in addition to the 30 already ratified by the United Nations. Read more.

New York man pleads guilty to $1.8 million Ether robbery: A New York man has pleaded guilty to kidnapping and robbery charges in connection with the theft of $1.8 million worth of ether. Manhattan District Attorney Cyrus Vance said that Louis Meza, who was accused of kidnapping an unnamed individual in New York last year and stealing their ether holdings, admitted to grand larceny in the first degree and kidnapping in the second degree. Read more.

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Nothing in this email is intended to serve as financial advice. Do your own research.