CRYPTO INDEX SERIES
CIS Gazette 21/Sep/2020
A summary of the weeks news & events in the Crypto/Blockchain world
Hedge Funds, Digital Asset Regulations and Crypto Payments
Since the crypto hedge fund industry still has lots of developing to do, the opportunities and future potential digital assets pose as an emerging alternative asset class. One of these opportunities is crypto hedge funds, which was triggered by the massive inflow of professionals entering into the crypto-asset market. Especially last years are the peak years of crypto hedge funds because 63% of them were launched in 2018 and 2019. The crypto hedge funds with assets under the management of over $1 billion in 2018 nearly doubled to $2 billion in 2019 and there are clear indications say this number will have roughly tripled by the end of 2020. Commonly, the main hedging strategies are heaped up around:
Crypto assets analysts suggest that because the whole ecosystem of crypto assets and crypto hedge funds are growing, systematic hedge funds are the best performing strategy for digital assets, but, in general, all crypto hedge fund strategies are able to generate sustainable alpha. Furthermore, the vast majority of investors in crypto hedge funds are appeared as family offices and high-net-worth individuals. More and more fund management is moving into digital assets and Wall Street is becoming more open to Bitcoin (BTC) and other cryptocurrencies which are called as “a safe haven” for investors and traders as an alternative investment.
This massive increase and upcoming cryptocurrency proposals, particularly for global digital tokens like Facebook’s Libra, nudged regulatory bodies and accelerated their next 5 years of action plans. One of these, the EU Commission, also launched its new projections and predicted a comprehensive crypto asset regulation with the principle of licensing and a one-stop-shop licensing which will be applied in all areas of digital assets in 2024. With the new regulation, the EU could force banks with these digital assets to hold more capital as a cushion, given the volatility and risks associated with these assets. Furthermore, the EU Commission wants to increase the use of digital finance as 78% of payments in the Eurozone. Further motivations include, but not limited to, making it easier to share data within the financial sector, encouraging competition and a wider range of services, while upholding the principle of “same risk, same rules, same regulation”.
Another giant actor in finance, PayPal, which has more than 300 million users worldwide, announced that they prepare for working with vendors to adopt cryptocurrencies and increasing their digital currency payments. PayPal also underlines the effect of the coronavirus pandemic on trade which detected a huge demand for e-commerce and digital payments.
Like PayPal, other payment giants Visa and MasterCard are working on making it easier for their customers to spend cryptocurrencies as well. Last months Visa announced to make a partnership with a leading digital wallet in order to “accelerate mobile payments in Europe.” MasterCard is still developing a move into crypto cards for making people spend digital currency easier. The last signs of progress show us we will see more actors from finance in crypto-asset world.
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