Hedge Funds Investing in Cryptocurrency – Blockchain & Law



so I'm not sure if you guys have seen them they said we were with Mike double drats he's a billionaire that's really uh investing a lot in the in the cryptocurrency space and he's speculated actually getting ready to launch upon uh approximately five hundred million dollars so on that Kevin if you could speak to what custodianship is potential exceptions to that you know and whether or not the panel feel afraid is there liquidity to handle a fun desperate five hundred million dollars yeah I'll speak to the the regulatory considerations about having aplomb that large can help you know I'll defer to the but you know so ultimately if you create a fund and you're you've heard of investment things that are securities so maybe he's gonna do we don't know what he's gonna do with it you know he hasn't really been very public about what he's investing but say he's more than happy his pond is is you know securities and he gets tokens on the side well he's got he's gonna have to register as an investment advisor presumably unless he's doing this from outside US and running a fund as a registered investment advisor then you need to comply with which requires basically a national bank hold every security the assets in here now you know I think that's been something we've wrestled with there's no one home with an answer you know you know I don't think there's Estonians out there they're over custody you know with an empty bank savings Association broken dealer that's registered you know so you know that's something that the industry will solve over time that's that's one issue I think you know especially with respect to European accent managers to tell me European funds you know we've heard fun take in the cash by the coins but getting the points back to fiat currency to then I think just just jumping in with a way to be point see that's a kind of a commercial spot business but I think it does go to have exchanges are regulated you know obviously you have and so the price might necessarily reflect on exchanges but all the times it's changes from the price that exchanges and discover it is once used as a reference point and often assert in the u.s. I mean I mentioned it you kind of got if you were to spin the ring with your grand about if you got payments law you've got security to the one that you've got in commodities and I think at the moment first thing is seeing the exchanges were regulated as a money service businesses unregulated and reading with that kinda money laundering and know your customer requirements cause their focus to point base for example of hot register stage time on a service business or regulations burn for each individual state when greedy now I think big point the other major cryptocurrencies have reached scale in terms of their market that they really need some market things regulation which I think the SEC has some extendable so the CFTC has experienced in there giving markets in dealing with things like spoofing and watch trade any kind of their abuses that currently you don't have any sanction of its balance unless coinbase RG dots or well it needs to introduce besides a full minute rule does that play o TC OTC means over-the-counter not necessarily going to coin things for Gemini pitch racks baloney acts or is that an exchange issue and I would say it's an OTC I think so last week there was a mention that I think kind of flew under the radar just to take step back I'm generating a reference clash commodity order and so commodities are our Father the purview won't seem to see the commodities trade of the mission you'll notice there I said Martin's Futures Trading Commission they generally do not oversight over direct commodity market the stock market of Bitcoin however in 2011 in the Frank out they were just you can see was giving the power of floor to take action potentially in a small market against market manipulation on false information so that's weak things you to what seemed to be a pretty straightforward option but they took it it was the first time that they were taken action and as it relates to the big one spot market against a great you know that that Ponzi scheme that that's not particularly granular linking but that's the first use of their power in tipping point spot market so this is the CFTC is the CFTC I don't think some they have the power to regulate a small market in general and in practice they'll only do so if there are they conceive and effects the futures market and comp which ties commodity reliance but there's nothing legally stopping them I think dual on the power to regulate that market so if somebody PC market was you know taking some action that had an impact on exchange prices or they just needed a swallow market generator then CDC so so we're seeing now a lot of hedge funds all over the world you know between five to 100 million dollars they're getting speaking to liquidity and I was potentially five hundred million dollars much fun but the majority of the trading happens off exchanges but it's likely that the prices are dictated by exchanges and the exchanges I don't think handle you know over-the-counter I think it's a speculation here but OTC is about anywhere three million to several billion dollars per day whereas bitter ex-employee guys is wonders of magnitude less than that so we're potentially seeing prices dictated by smaller amounts of training whereas the greater trading is on OTC and I think that plays because what did one of those headphones put in you know we saw it on gee doc someone put it wasn't ten million dollar cell water on etherium maybe was thirty million and immediately correction the price but that goes that happens on the OTC on a regular basis on a daily basis so we have one of these headphones that decides to put in a twenty or thirty million dollar sell order on big drugs you know the price of bitcoins to just crash immediately and now that these are kind of happening everywhere especially for number five potentially a 500 million dollar fund come up do we really have a liquidity for this is this and again this is more of a business commercial point as opposed to lawful is this potentially not the best thing for the ecosystem at this point exchange the exchange question is interesting though that greatly roundabout so the regulatory soup rounded up is interesting because exchanges you spin it any land on payments and that is covered by financial crimes enforcement network and what that says is if you're accepting and transmitting products on behalf of other people funds can mean Authority then your money transmitter and that's such a broad definition I mean think about how often you like you know you borrow money from people or you go out and split a bill you take money and then like you take their money now and then you give it to the right but you're accepting callosum you're transmitting it to someone else I'll be having some capital it's such a broad definition it's crazy so it's changes clearly fall under the definition of accepting funds to get custody and then they transmit it on behalf of their customers some exchanges have non-custodial is an example where you don't actually give the funds to change they so the but my point of landing here is it's this just one small slice of the wheel where you have quite a surprise this is worried about the club's name financial crimes it's worried about money laundering and it's worried about funding terrorists now if you think about that as a driving force of rails where the agency it's not going to cover all the things that you mentioned like wash trade like you're not going to care it's much about things that kind of matter to the industry you have to turn the wheel bid get to whether or not that SEC governs the exchanges well the SEC is a Securities Exchange Commission so if they're not selling securities then world jurisdiction even with the SEC they spin the wheel again and you get to the CFTC and generally speaking you know these things commodities but as you pointed out the CFTC doesn't really watch doesn't really exercise a heavy hand with its enforcement you both have the authority over the exchanges so I mean there were some accidents for some margin many of these rules but can you point to what was the neat spot come on so this Bob would just be me direct trade so buddy traded a big point with Josh right now if we agreed tomorrow they basically don't take the risk of prices tomorrow that would be terrific this body's trading directly you

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