It’s getting hard to ignore the cryptocurrency market. Bitcoin has been on a tear this year and some of the skepticism that surrounds the market’s newest asset class is falling away as regulators and industry experts start to give their support.
Fidelity is one such firm that has been actively supportive of cryptocurrencies as a potential new asset class and area of investment for its customers in the long-term.
“We are spending a lot of time doing research internally on how to build cryptocurrency product offerings in order to create new revenue streams,” says Steve Wager, VP of Product Development within the Fidelity BlockChain Incubator. “Although we do not offer any cryptocurrency products at the moment, it is something we are thinking about it in the background.”
Despite the growing interest, cryptocurrencies have been shunned by some high profile industry insiders. Just recently, JPMorgan Chase CEO Jamie Dimon remarked that the currency is a fraud, noting that Bitcoin will never work. He even said that the currency is bound to crash. Reuters quoted Dimon as saying: "You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart.”
A high level of volatility has been another major criticism or cryptocurrencies, although Wager believes that volatility is beginning to come more into line with other asset classes. “That’s not to say that volatility doesn’t exist, but it is coming down and starting to become more trackable - we are spending a lot of time trying to figure out how to conduct technical and fundamentals analysis on cryptocurrencies,” Wager says. “The other positive is the true non-correlation to other asset classes.”
Cryptocurrencies got a significant boost recently when the Ontario Securities Commission
(OSC) pledged its support to firms planning to launch cryptocurrency offerings. "We need to be prepared for this new asset class and way of doing business,” the regulator said. “At the same time, we must balance the demand for new ways to raise capital and invest with the need to protect investors from high-risk or fraudulent activities,".
OSC published clear, detailed guidelines on how firms can create compliant products that can eventually be sold to investors. The regulator said its approach is consistent with that of other international regulators such as the US Securities and Exchange Commission, the Monetary Authority of Singapore, and the United Kingdom's Financial Conduct Authority.
“In our view, that is a positive because it removes a lot of the greyness and starts to add legitimacy to the space,” Wager says. “If we start to have more institutional-type product offerings in the space, our view is that we will start to see a more broad and widespread adoption of cryptocurrencies as an investment tool."
"Some of the types of products we see coming off the back of that are Canadian equivalents of the Bitcoin trusts, which will include both closed ended and open ended funds.”
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