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Emily Parker, China and Japan Affairs Consultant, Global Blockchain Business Council
And all round table guests
Tyler Evans, Managing Partner, UTXO Management
HashKey Capital Partner, Jupiter Zheng
Anthony Blackburn, Head of Growth, Plume Network
Emily Parker (Host): Hello everyone!I’m back again. I was on stage two minutes ago, and now I’m here again. This is actually a continuation of our previous discussion. We have been talking about how these old money can enter the world of digital assets. Today there will be more details. Three experts will have a conversation with you. The conversation is not so formal or so rigid. If you have any comments, please interrupt me, not the Q&A, but the conversation.
Let’s take a look at the secrets and ask a basic question first, what does old money mean to everyone?
Tyler Evans: I came from the United States and just landed a plane a few hours ago. It was a big change in the United States. 2024 is the first year of Bitcoin institutionalization.Many interests are actually from the traditional asset management family office (starting). You can also see that some of the increase in interest in Bitcoin is not only sovereign funds, but also pension management institutions. Big banks have joined the cryptocurrency circle, which is a very interesting institutionalization.
Jupiter Zheng: It is called “new money” and “old money” in traditional mechanisms. What is the significance of old money to cryptocurrency?There are some differences. Traditional divisions of new and old are also different. If they come from very traditional institutions, large institutions, funds, banks, and family offices, they are called “old money (old money). Of course, some billionaires have their money from trade, which comes from digital transactions, and they are called new money.
There are differences between traditional financial institutions and new institutions in Hong Kong. With some new trading methods and trading platforms, we can see that many old capitals have entered the new cryptocurrency circle.
Anthony Blackburn: I think the main thing is that the family office is “old money”, trust funds, and they hope to have some interaction with Bitcoin and crypto circles, and we can also see some trends.
Emily Parker (host): Everyone has been talking about the situation in the United States, mainly in China, because I mainly cooperate with Asian family offices, and everyone is a global expert.Can we see whether Asia and the United States are regional or global trends?In the case of the United States, I see more stable, and in Asia, I will see a lot of people talking about it, but it doesn’t fall on paper.Can you talk about how to do it in Asia and the United States in detail?
Anthony Blackburn: In the process of dealing with Asian home offices, institutionalization is not as institutionalized as the United States. For example, when dealing with Asian home offices, there is a very complex regulatory environment in Hong Kong, which makes these family offices unwilling to contact crypto assets such as Bitcoin and Ethereum. In general, they are still very cautious about this.
As you mentioned just now, they might first do mining and then enter BTC, but it is still very subtle because the threshold for interaction with DeFi is not very high, and there will be more interactions with more supervision and hosting in the future.
Jupiter Zheng: In terms of the acceptance of the institutionalization of Lao Qian, there are many records in the United States, but in Asia, many investors may be reluctant to disclose their participation in the crypto market for various reasons. This is why I often hear people say that I have participated, but generally don’t see the actual records.As for Asia, for example, they also invested in the largest BTC ETS fund in the United States (sound), but the founder said that although the amount I invested was not very large, the name of the institution appeared in documents submitted by US regulators, so this fund was not willing to appear in the public eye and was not willing to disclose their investments in the Crypto field to the public, so it is difficult for you to find old money and large institutional investors willing to express this publicly.
Emily Parker (host): I also agree very much. Maybe in terms of institutional investors’ participation, I have indeed seen a trend rising, but I hope more institutions will participate, but what challenges do there exist?Is it because of regulatory challenges and cultural challenges?Or is the institution itself unwilling to admit its investment in cryptocurrency? I would like to ask what are the specific barriers?
Tyler Evans: From the US side, many regulatory barriers have now been removed, and many structural barriers have now ceased to exist.The two key gaps in the market are still related to education. We need to do a lot of work to educate the public to help them better understand.
As for the bigger barriers, as mentioned by a guest before, more reputation-related barriers are. If large institutional investors and pension funds publicly state that they own Bitcoin, there is a huge reputation risk for them. Even if they only allocate 1-2% of crypto assets in the overall asset allocation, there is a huge reputation risk for them, and there is a huge career risk for them.If they invest, the entire profession will be linked to it. For family offices, because there is no need for public reporting and disclosure to regulators, family offices may be more agile and agile in this regard.
Emily Parker (host): If there are institutions like Goldman Sachs and Morgan Stanley, how many such large institutions have publicly expressed their opinions to invest in the trading market themselves, and how many such large institutions need to participate in order to make the public more confident?
Tyler Evans: The situation has changed now. The pension fund has a Wisconsin Teachers Pension Fund (sound) in the United States. Such institutions have been publicly disclosed. Are they participating in the crypto market through MSTR?No, they hold it directly, but there is indeed an extremely cautious attitude. They only invest a small part, so there are still such barriers now.
Anthony Blackburn: As you mentioned in your speech just now, Japan also plans to adopt USTC recently, and large institutions such as SDI and NTT have recently announced their investments in Web3 and Web3 research fields.I think this market is still very top-down. When you see what is happening in the United States, it takes another 2-4 years for South Korea to wait for a similar trend, and it may take longer for Japan to wait.
Jupiter Zheng: From the perspective of logistics and infrastructure, the funds of traditional institutions are custodian in private banks. All asset classes, such as stocks, fixed income and other alternative investments, are based on banks as the regulators. If you want to invest in the crypto field, the asset custodian may be another institution. It is difficult to convince these large traditional institutions to transfer their funds from traditional banks to another even licensed custodian institution. So sometimes you need to consider that if traditional banks can provide such custodian services, such as connecting with HashKey in technology, it is easier to convince traditional large institutions to enter the crypto field to invest because they do not need to consider asset risks.This is my opinion on this issue.
Tyler Evans: I think there is another point, which is strategy.For Bitcoin, if institutions invest in Bitcoin, it is equivalent to a Trojan horse. If you buy stocks, even if the volatility is as high as Bitcoin, or even greater than Bitcoin, for fund managers, their career risks are not that high.For example, the Nasdaq index now has the inclusion of Bitcoin to a certain extent. From the perspective of passive investment, if it is just a passive investment fund, they have already exposed crypto assets in their index investment, but they are still passively tracking the index.
Emily Parker (host): Yes, everyone’s cautious attitude is indeed the reason everyone mentioned. These represent very unusual investors feel relieved about MSTR?Although it is included in the Nasdaq 100, because MSTR is a software company, it is one of the components of the Nasdaq 100 index, but in fact it is not a real software company. No matter what, as long as you passively track the Nasdaq 100 or other indexes, you will have exposed crypto assets.
From my personal point of view, I think people don’t actually pay much attention to this aspect, especially when you consider pension funds.Pension funds represent extremely conservative investors to a certain extent. If they have risk exposure to asset classes with very high volatility, it seems that they are not particularly concerned about this aspect. What do you think?
Tyler Evans: I remember one time I met a large institutional investor in the United States, a large number of institutions, who also participated in global investments, such as Meta planning in Japan and Hong Kong. They also had similar strategies, strategies in strategies.I think the beauty of the strategy is that it does have exposure to Bitcoin, and it has risk exposure to Bitcoin’s volatility. However, through different securitization products, such as corporate bonds and other bonds and preferred stocks, the volatility of risk returns is achieved in this way, and Upset is captured. Through such conversion methods, it is actually exposed to crypto assets, which is equivalent to packaging Bitcoin’s high-risk, high-volatility assets and other low-volatility and low-risk assets, thus forming a product that can be suitable for all institutional investors.For investors, you know what you are buying, and you also know how the risk stratification is.
Emily Parker (Host): What do you think?
Jupiter Zheng: I actually noticed that there is a phenomenon among the rich. When they pay attention to BTC volatility, they also hope to obtain the protection of principal, hoping to obtain the protection of principal, and also the returns brought by Bitcoin volatility. Indeed, some institutions provide products like the rich, so that they can obtain the additional returns brought by Bitcoin volatility by selling Put and put options.At the same time, it can protect their principal, which is why such products are now very popular among institutional investors.
In addition, they know a lot about structural products and traditional products. They know how to play structural products. They want to get the additional returns brought by Bitcoin growth, and at the same time they can ensure that their principal is protected.
Emily Parker: In my speech, I mentioned that even though Soloner has very mature financial or engineering things, there are indeed other imitators who do not have mature institutions.You also mentioned the Meta planning in Japan. Who invested in Meta planning in Japan?
Tyler Evans: The journey of Meta planning Bitcoin was a year ago, and the Bitcoin journey began last April. Since then, there have been specific developments, transforming from the sunset real estate industry, making the company now one of the best performing stock institutions around the world.They have actually achieved three stages of development. At the beginning, they first attracted Japanese retail investors, mainly because of the arbitrage space between taxes you mentioned just now. For Japanese retail investors, you have huge advantages in taxation than buying a stock directly compared to buying Bitcoin. Even if you buy Bitcoin ETFs directly compared to buying Bitcoin, you have huge advantages in taxation.
So now Meta planning’s investment strategy. For example, one of the largest investors in Meta planning is Norway’s sovereign wealth funds, but in addition, they are also included in a series of US stock indexes.It only took a year to attract retail investors in Japan, then further attract retail investors around the world, and finally attract institutional investors.
Emily Parker (host): Do you think Meta planning only buys BTC, or does it have other businesses?
Tyler Evans: They also run a hotel.
Emily Parker (host): But now Bitcoin has become their owners’ pillar, which is very interesting.
Next, switch to ETFs. I just mentioned ETFs in Hong Kong. I understand that there were certain challenges in the early stage. At least as far as I have heard, for example, the number of ETFs opened at one time was not particularly large, so people hope to subscribe for more ETFs. I wonder if this statement is correct?In addition, I would like to ask everyone to share how ETFs are developing in Hong Kong and what challenges are currently facing?
Jupiter Zheng: It is true that at the beginning, the amount of data was publicly visible on the platform, and you can also check it yourself, and the data is real.The main reason for this phenomenon is that the complexity of investors in the Hong Kong market itself is that not all investors can invest in the spot ETF market.If you cannot meet the KYC requirements of economic operators, you will not be able to participate in ETF trading.In Hong Kong, about 20% of economists are able to provide relevant transaction services to their customers.For some of their large institutional investors, investors with the largest trading volume cannot provide ETF products to these customers.Why?This is mainly KYC.
In addition, economists like China have no way to provide ETF services to their customers, because for well-known reasons, this also limits the real purchasing power.Many Hong Kong investors are waiting for the opportunity to buy ETFs.For example, if you want to participate in the US spot market ETF in Hong Kong, you have a KYC requirement. Due to KYC, many people cannot participate.Therefore, ETFs still have great potential to be released.
But I also think that in addition to Hong Kong spot ETFs, spot ETFs can also be redeemed or invested in other ways, which gives ETF holders a lot of convenience.In addition, there is an institution that can participate in the spot market in Hong Kong. If you own BTC, you can convert BTC into BTC ETFs. The cost is very low, so you can participate in the steam of CS, so that you can have more usability.
There is some relaxation of policies now, which can promote the development of ETF trading.It can also be seen that there is actually not such a big difference in the market. Everyone is comparing the magnitude and speed of AUM.
Tyler Evans: Soon, I would like to ask the question about Hong Kong ETFs. Big banks are also doing it. We can see that it is driven by hedge funds. We can see many large positions. Who is the largest holder of ETFs in Hong Kong?
Jupiter Zheng: I mentioned earlier that one-third of the money in the United States comes from hedgeers, but there are no speculative investments in Hong Kong now. There may be, but due to the time difference, it is difficult to hedge.The main money comes from retail investors, and of course some investors with a long-term perspective, who will be willing to put their funds on crypto assets.
Emily Parker (host): Next, I would like to talk about ETFs, which may be more general.Do you think we have reached this point and no longer need such products? Of course they are very important. At the beginning, it is difficult for ordinary people to open an exchange account, but now there are many ways to buy Bitcoin.In a sense, MSTR strategy companies and ETFs do not conform to the encryption principle. Encryption should be decentralized and there should be no intermediary companies. These places (intermediary companies) have handling fees, which is different from the ideas and concepts of Bitcoin itself.Does the encryption circle really need these institutions and these intermediaries?Does it really make sense for Bitcoin in general?Of course, it is said that of course it is good, because institutions and individuals can participate in Bitcoin transactions, but it has some damage to Bitcoin’s own concepts and ideas.For example, if you buy Bitcoin from an ETF, you do not own Bitcoin, you are a Bitcoin product, which is a relatively philosophical issue.
Anthony Blackburn: In principle, I agree with your idea. I think the biggest problem is lack of trust. From the perspective of DeFi, centralized exchanges are the same, and they are a matter of trust.Maybe if we have enough trust one day, some big problems will arise.
Emily Parker (host): I want to hear Hashkey’s ideas and opinions.
Jupiter Zheng: We also do Bitcoin products when doing ETFs. It has different ideas for ordinary investors. It is difficult for you to convince traditional investors to manage their wallets themselves. The wallets cannot be seen. They think it is easy to accept them to simply buy ETFs. Even if there is an intermediary fee, it is equivalent to buying buffer packages and buffer layers.For real decentralized believers, buying BTC directly is what they want to do, and they will even transfer Bitcoin directly from exchanges and ETFs to their wallets.Many people do differently. Many people think that Bitcoin is the future, but they do not have the ability to manage the actual wallet of the entity.So I think ETF is a very good next step, which can solve the regulatory and custody problems.
Tyler Evans: Indeed, this is a very important transition. There will be new progress under the new Trump administration in the United States. You can do self-custody. This is a financial product that we can use Bitcoin directly, rather than just buying Bitcoin as the underlying layer.Trusteeship is a great responsibility. Some investors are professional investors, but professional investors do not want to bear the responsibility of “mountain”, such as liquidity, profit margin, etc. I don’t think everyone in the world is willing to do this job and assume this responsibility.
Emily Parker (Host): Let’s talk about North America briefly. Let Hong Kong aside first. You know the situation in North America very well. Tyler will talk about what changes the changes in the United States have to the entire industry?There are many new changes in the United States, but which one is the most important?Now the president himself is playing cryptocurrency. This is a hot topic. We are also very interested in everyone’s ideas. Let’s start with Tyler and talk about whether there have been changes in the United States and other global markets. In the past year, I think the United States’ attitude towards Bitcoin and the cryptocurrency circle has changed the most.
Tyler Evans: My personal opinion is that these changes are really happening.It can be said that I have not participated in the political circles and invited “President Bit” to speak at the 2024 Bitcoin Conference. On the first day, he will do some work and build a strategic reserve of Bitcoin. He will do it little by little according to his promises, and the speed is very fast.
I think you are right. Everyone wants to see how the development will develop in the future. You can see that all legislation is being implemented step by step. This industry has always hoped to make legislation and do it very quickly, especially the United States is purchasing new Bitcoin for its strategic reserves.This is a very good signal, and the United States also wants to prove to the world that they attach great importance to Bitcoin.
Judging from my own predictions, I may see some progress at the end of this year.
Anthony Blackburn: I agree that the progress is indeed real, and my understanding is that this has been planned for several years, so I agree that the United States may establish a strategic Bitcoin reserve before the end of the year. Recently, regulators have been looking at how Hong Kong manages the crypto circle.For example, countries like Japan and South Korea will follow the footsteps of the United States, and the United States will follow the lead, which is the focus of attention in the industry.
Of course, I also agree that strategic reserves are the most important news, and many other countries may follow suit, and Thailand and many Southeast Asia are also very interested.I think this is indeed a very serious issue that needs to be taken seriously.
Emily Parker (host): We have mentioned many topics, and the issue of real-world asset tokenization has been discussed for a long time. There are also some examples that can greatly allow traditional old money to find opportunities to enter the crypto market.
What exactly do they want to do?What can Bitcoin and the crypto circle bring to them?Because it only takes 2 minutes, how is the tokenization progressing now? Do you think this is the general trend or has it been overheated?
Anthony Blackburn: I think this is a good entry point, especially when old money can use it to enter crypto transactions. They have a better understanding of assets, artworks and real-world assets. On the demand side, there is a good bridge to look at specific products. For example, in these products and other products, they do have more substantial demand for encryption and tokenization, which is more important.
