As bitcoin, ethereum and other cryptocurrencies get increasing attention from investors, Wall Street and its traditional banks continue to adjust to the shift. Catch up on this week's top stories highlighting the intersection of these old guard and new school areas of finance with this recap compiled by The Fly.
FACEBOOK CRYPTO UNLIKELY TO BE ‘GAME-CHANGER’: Jefferies analyst Brent Thill said Monday he believes Facebook's (FB) Libra is unlikely to be a near-term "game-changer" for the company after he surveyed 600 U.S. social media users. Most of those surveyed said they were unlikely to use the cryptocurrency and a lack of trust in Facebook and existing mobile payment wallets were cited as impediments to adoption, the analyst said. Thill, however, remains bullish on Facebook's core advertising opportunity. He sees $10 of earnings per share in two years and keeps a Buy rating on the stock with a $230 price target.
FACEBOOK’S LIBRA TO FACE SCRUTINY: Christopher Woolard, executive director of strategy and competition at the Financial Conduct Authority, said Libra will raise societal and governmental questions that will require close examination, Reuters’ Tom Wilson reported Tuesday. Libra’s “size and scale will pose questions for society and government more generally about what is acceptable and desirable in this space,” Woolard said. “Historically, this may have been a sector that has lived by the mantra of ‘move fast and break things,’ but the issues raised here require deep thought and detail.” Additionally on Tuesday, a group of over 30 organizations sent a letter to leaders of five congressional committees demanding a halt to the Facebook project to deal with the “profound questions” it raises, Bloomberg’s Austin Weinstein reported. “All of us believe the risks posed by Facebook’s proposal are too great to allow the plan to proceed with so many unanswered questions,” the groups said. Meanwhile, Bank of Japan Deputy Governor Masayoshi Amamiya said digital platform operators like Facebook must comply with regulations on money laundering and risk management, Reuters’ Leika Kahira reported Friday. Amamiya said operators must act responsibly as providers of safe and secure payment settlements and central banks must be vigilant to the impact moves like Facebook’s cryptocurrency could have on their country’s banking system. “As for Libra, we must bear in mind that the potential global user-base could be enormous,” he said.
FCA PROPOSES BAN ON RETAIL CRYPTO DERIVATIVES: In a Thursday announcement, the Financial Conduct Authority said it is proposing rules to address harm to retail consumers from the sale of derivatives and exchange traded notes referencing certain types of cryptoassets. The agency said, “The FCA considers these products are ill-suited to retail consumers who cannot reliably assess the value and risks of derivatives or ETNs that reference certain cryptoassets. This is due to: inherent nature of the underlying assets, which have no reliable basis for valuation; the prevalence of market abuse and financial crime in the secondary market for cryptoassets; extreme volatility in cryptoasset prices movements, and inadequate understanding by retail consumers of cryptoassets and the lack of a clear investment need for investment products referencing them…The FCA is therefore consulting on banning the sale, marketing and distribution to all retail consumers of all derivatives and ETNs that reference unregulated transferable cryptoassets by firms acting in, or from, the UK.” The agency estimated that the the potential benefit to retail consumers from banning these products to be in a range from GBP75M to GBP234.3M a year.
BANKS, IBM TEST RETAIL FINANCING BY BLOCKCHAIN: ANZ (ANZBY), Commonwealth Bank (CMWAY), IBM (IBM), Scentre Group (STGPF) and Westpac (WBK) announced Thursday that have jointly launched a live pilot for Lygon, a new digital platform using blockchain technology to change the way businesses obtain and manage bank guarantees that are often required as part of a retail property lease. Initial findings suggest that the Lygon platform has the potential to reduce the time it takes to issue a bank guarantee from up to a month to on or around the same day. The pilot will run for eight weeks with live data and transactions for a test group of retail property leasing customers from 3 July. In subsequent phases, Lygon plans to expand the range of digitised bank guarantees that it supports across other industries as well as offering its services to other customers in the retail property sector. The pilot will involve lease holders with retail outlets in some of Scentre Group’s Westfield living centres across Australia. After the pilot, Lygon intends to offer access to the platform to all issuers, applicants, and beneficiaries and support broader use cases over time.
IDEANOMICS, THREE GORGES, TIANDA ENERGY ENTER AGREEMENT: Ideanomics (IDEX) announced Monday it has entered into a strategic agreement with Three Gorges Power, Tianda Energy and Shenshang Technology to promote and distribute methanol, and solid hydrogen based EV fast-charging solutions, into existing fuel station networks, as well as residential and industrial areas. These new energy management solutions will be part of an integrated network access that includes large industrial and commercial compounds, as well as other areas of vehicle concentration throughout China and the ASEAN region. Ideanomics, through its NECV division, will provide client acquisition, strategic sales and marketing services, as well as other advisory services.
CRYPTO STOCK PLAYS: Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Overstock (OSTK), DPW Holdings (DPW), Kodak (KODK), Ideanomics, Riot Blockchain (RIOT), Pareteum (TEUM) and Social Reality (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.
PRICE ACTION: As of time of writing, bitcoin dropped roughly 4.8% this week to $11,178 in U.S. dollars, according to TradeBlock.
Keywords: bitcoin, ethereum, crypto, cryptocurrency, cryptocurrencies, token, stocks, blockchain, stablecoin, regulation