The U.S. bitcoin ETF application approvals by the SEC this week signal the mainstream adoption of new digital assets through a new era of a who’s who of trusted gatekeepers like ARK Invest, BlackRock, VanEck, WisdomTree, Fidelity, Invesco, Franklin, Hashdex and Valkyrie, a year on from the implosiof crypto exchange FTX.
Bitcoin is 15 years old and while not yet of driving age, it is playing the leading role in the innovation of financial markets around the globe. Digital assets are heading for main street.
For the average American, bitcoin has been the most accessible and best performing investment of the new millennia. Charlie Billelo’s asset class total returns since 2011 provides one of the most illuminating reasons bitcoin is so popular – an annualized return of 148.9 percent over a 13 year period with 3 draw down years says it all. Drop the mic.
SEC Commissioner Hester Peirce put it best saying,” More than ten years after the filing of the first spot bitcoin exchange-traded product (“ETP”) application, the Commission finally has approved multiple applications by exchanges to allow the listing and trading of spot bitcoin ETPs.”
I am celebrating the right of American investors to express their thoughts on bitcoin by buying and selling spot bitcoin ETPs.”
SEC Chair Gary Gensler remains cautious saying in a statement, “While we approved the listing and trading of certain spot Bitcoin ETP shares today, we did not approve or endorse bitcoin.”
Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto.”
Will Bitcoin Help Fix A Broken American Capitalism
The next best investment, trailing by a long way, are stocks with the S&P in second place with an annualized performance of 17.9 percent, the market is led by The Magnificent Seven stocks, originally dubbed the FAANGs by CNBC’s Jim Kramer.
The Magnificent Seven are closing out a huge year, all easily beating the S&P 500 index jumping 72 percent on the excitement of AI — Amazon.com (AMZN), Apple (AAPL), Google parent Alphabet (GOOGL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA).
Gillian Tett at the Financial Times points out there is a significant concentration risk with the Magnificent Seven – with over $30 trillion of value, greater than the stock markets of Canada, the U.K. and Japan combined. As importantly Tett highlights the increasing concentration of wealth in stock ownership, which is concentrated among the wealthiest 10 per cent of the U.S. population owning 92.5 percent of the market — a “record high concentration”.
Given this concentration of wealth and calls that American capitalism is broken and not serving the average American, it would be fair to muse that some important folks on Capital Hill don’t get financial services, or crypto, or both, or are possibly misled by misaligned consumer protection agendas.
No one questions the need to protect consumers, but crypto has a much lower per capital crime rate than the biggest scams of imposter and online shopping scams in the U.S. on prizes, sweepstakes, and lotteries; internet services; and business and job opportunities – the top five fraud categories.
Maybe bitcoin will help rescue American capitalism.
Bitcoin is the face that launched a thousand tokens in this halcyon epoch of digital innovation. It has been breathtaking for innovators and consumers of new digital assets. Bitcoin begat Ether which begat stablecoins, central bank digital currencies (CBDCs), protocol tokens, the tokenization of real-world assets like securities and commodities, non-fungible tokens (NFTs), and a smorgasbord of new digital financial market infrastructure replacing the old plumbing.
It’s quite surprising then that the 2023 Economic Report Of The President published in March was so disparaging of cryptoassets and digital ledger technology (DLT) stating, “there have been limited economic benefits from Distributed Ledger Technology.” This would have been like saying, “there have been limited economic benefits from the internal combustion engine,” in 1860.
Clearly the authors of this report were not early investors in bitcoin.
You would think Washington policymakers were a bit more open to digital innovation given the U.S. pretty much invented the modern global tech sector and has dominated it for 50 years.
Washington should be doing everything it can to further wave in this halcyon period of digital innovation and the next best opportunity to generate wealth for average Americans, while defending and extending the strategic U.S. tech and financial services sector agendas.
Looking Eastwards To Web3 Development
Following the spectacular implosion of FTX, and subsequent attention paid to the regulatory laxity that enabled disgraced CEO Sam Bankman-Fried to effectively run a giant Ponzi scheme, according to the prosecutors, the American regulatory perspective appeared over-cautionary, perhaps understandably.
While safeguarding interests has raised questions about overreach and creating barriers for the average American to invest, another overarching question looms about protection: Is the U.S. inadvertently ceding ground to the East by not supporting digital innovation?
For decades, the balance of power in the tech space has skewed West, and the wealth and influence consolidated in the tech economy has preserved its dominance. Indeed, Apple, Amazon and Microsoft closed the 2010s as the world’s first trillion-dollar companies paving the way for the Magnificent Seven.
And yet the specter of Asia looms large, Chinese innovations such as Huawei’s 5G have fed into the narrative of growing Asian influence, while a recent report by the Australian Strategic Policy Institute (ASPI) showed China leads the world in 37 out of 44 critical technologies.
In Europe, crypto legislation is already in the process of being re-imagined with the EU’s forthcoming Markets in Crypto Assets (MiCA) a testament to the balance it hopes to strike – enforcing rules while fostering innovation, and the U.K’s new FSMA bill paves the way for stablecoins and digital assets.
The Middle East digital asset charge is being led by Dubai’s VARA and DFS, and in Abu Dhabi by ADMG FSRA, under a benevolent and strategic Emirate’s executive leadership.
Asian cryptocurrency epicenters such as Japan, Hong Kong, Singapore, and South Korea have gradually emerged as genuine threats to the U.S. not merely by providing clear regulatory frameworks but also championing Web3 in the corridors of power.
Japan’s explicit support for the crypto sector as a part of its national strategy underscores this commitment. The active participation of Japanese Prime Minister Fumio Kishida and Tokyo governor Yuriko Koikeat at July’s WebX conference spoke volumes. This is a government eager to position itself as a friend to Web3 builders and investors.
One can’t imagine the U.S. president pitching up at ETHMiami anytime soon.
In South Korea, the government has invested over $170 million in metaverse technology, with plans to create a virtual replica of the capital city that dispenses public services. The nation’s crypto industry has long punched above its weight with countless gaming and NFT projects, Web3 venture funds and accelerators, and flagship events like Korea Blockchain Week (KBW).
It’s not just government support that contributes to the credit of the Asian crypto scene. Major Web2 firms are also throwing their weight behind fast-growing Web3 ventures. Earlier this year, Sony joined forces with Japan’s leading blockchain Astar Network to create a Web3 incubation program with a view to “solving various problems in their [Sony’s] industry.” Toyota has also started looking at ways Astar can be leveraged to promote efficient business decision-making and team management.
“Japan has specifically made Web3 technology a part of the national strategy and invited successful blockchain organizations to guide the government on the best technologies and approaches to implement blockchain tech,” says Astar Foundation Head Maarten Henskens. “For this reason, you see organizations like Startale Labs (Singapore-based Web3 infrastructure company) invited to the group that is developing Japan’s CBDC.”
Asian regulators, for their part, are doing what they can to green-light initiatives and incentivize investors. In September, the EOS token was approved for trading on Japanese exchange BitTrade, which is licensed and regulated by the Financial Services Agency.
“While the West continues to antagonize blockchain companies, Asia is welcoming us in with their arms wide open,” commented EOS Network Foundation CEO Yves La Rose on Twitter.
Web3, to be sure, is just one battleground in a war fought on multiple fronts (defense, robotics, energy, AI, biotech, etc). But a charitable interpretation of growing Asian influence could be that we see more balanced technological wealth distribution.
After all, digital assets are intrinsically global in nature and should reflect global participation. As Asia empowers its populace, emphasizing both creation and consumption within the digital economy, a more neutral socioeconomic world could emerge.
The more hawkish view is that Asia may move to dominate the United States as the world’s Web3 superpower – crushing Stateside innovation and by extension punishing those seeking to interact with such technologies. Time will tell.
La Rose says, “Many emerging Web3 businesses are electing to focus on markets such as Hong Kong, Singapore, and Japan where there is much less ambiguity in digital asset regulations, but it’s more than just regulatory clarity driving this trend.”
Factors such as market potential, technological infrastructure, and a vibrant ecosystem for innovation also play pivotal roles. These jurisdictions are also increasingly providing financial incentives and supportive measures for blockchain and crypto businesses, such as government subsidies, lower tax rates, and R&D credits.”
If the promise of the Web3 age is truly democratized access and opportunity, then perhaps Asia’s open-arms approach represents a step closer to realizing that vision. With its regulatory zeal, U.S. legislators must conduct some soul-searching: Will they adapt and co-lead this global transformation, or will history show that they fumbled the ball and failed to seize the digital day?
The U.S. bitcoin EFT approvals might just be the starting gun to turn this corner.