Peak Stable Coin: Did JP Morgan Just Top-Tick the Stable Coin Market?

By John Sarson, Managing Partner, Sarson Funds

The announced launch of JPM Coin (JPMC) last week did more than just complete an immutable reversal in Jamie Dimon’s public cryptocurrency stance. Unveiling their non-public stable value coin for internal money transfers, JP Morgan’s hopeful embrace of the blockchain revolution may have marked the moment when the market witnessed “Peak Stable Coin”.

As a bank too big to fail, embracing the future means committing to an uncomfortable level of uncertainty. Despite forward-thinking banks like Broadridge Financial enjoying a 4 year head start in delivering blockchain powered operational efficiencies, JP Morgan’s courageous decision to make an attempt at evolving almost reaches the commendable threshold.

What is a Stable Coin?

A class of digital assets, stable coins behave in a manner similar to an ETF. Like an ETF, new shares get issued and withdrawn from the public markets in an attempt to replicate the performance and stability of a specific fiat currency pair, usually the US Dollar (USD).

Stable coins claim a matched issuance basis of 1:1 with fiat holdings held as collateral in a traditional bank account.

Why Stable Coins Matter

Not all cryptocurrencies participated in the bloodletting that was 2018. As souring public sentiment and plunging prices captured headlines throughout the year, one class of cryptocurrency enjoyed a banner year – the stable coins.

Tether (USDT) leads the stable coin segment with $2.02 Billion in total assets. Launched in 2015, Tether effectively “tethers” it’s price to the US dollar at $1.00 per digital token. The introduction of Tether offered crypto market participants a new investment option within their cryptocurrency exchanges. It gave crypto speculators the option to move assets out of plunging cryptocurrency markets without making a trip back to their traditional fiat currency bank – something few crypto traders with large taxable gains in 2017 where very excited to do.

Throughout the various sell-offs of 2018, stable coins proved very useful for investors for looking to temporarily exit cryptocurrency market volatility. Assets invested in Tether (USDT) grew from $320 Million in September 2017 to $2.8 BILLION by September of 2018.

Tether’s enormous growth, which occurred despite high profile concerns about accounting irregularities, prompted a slew of additional market entrants such as USD Coin (USDC) (launched in October in a collaboration between Coinbase and Goldman Sachs backed cryptocurrency exchange Circle), True USD (TUSD) and the Winklevoss twin’s Paxos Standard Token (PAX), the only boasting a charter from the New York State Department of Financial Services).

The Future for Stable Value Coins?

Despite occasional use by some market participants in 2018, questions remain over the future importance and usefulness of stable value coins. Sound cryptocurrency asset managers should try to avoid using stable coins. These digital assets introduce unnecessary counterparty risk and execution volatility into the investment process – something we seek to avoid. Stable value coins also lack insurance and do not pay interest.

Useful as a 2018 stop gap measure while improving and opening crypto-to-fiat, we predict reduced future appetite for stable coins as these traditional and well developed channels possess notable maturity.

Realizing the Regulatory Reckoning

Cryptocurrency speculators and tax dodgers sour the stable coin outlook further. Hoping that cryptocurrency gains would remain off the tax man’s radar until the money returned to the bank, these market manipulators have now sobered to the reality that digital asset income shielding will not work in their favor.

The blockchain’s immutability delivers transparency and cryptocurrency traders now more readily understand the ease of discovery for activity on a US-based cryptocurrency exchange by financial and regulatory authorities. This April 15th the tax man cometh to crypto, stable value coins or not.

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Sarson Funds Removes Bitcoin SV from Fund Eligibility

Providing secure and transparent digital asset investment options is Sarson Funds’ priority one. To ensure this, our Blockchain Insider Assurance (BIA) team conducts regular and thorough reviews of digital assets under consideration for, or included in, Sarson Funds cryptocurrency investment funds.

Upon last week’s BIA team review, Sarson Funds has removed Bitcoin SV’s eligibility for inclusion in any Sarson Funds investment or project.

Cryptocurrencies and digital assets are an emerging and maturing space and we want to ensure investors get access not only to digital assets that meet the basic eligibility requirements of our funds, but also that meet our high fiduciary and community value standards. Clearly, Bitcoin SV and the conduct of its team do not meet this standard.

Effectively immediately, Bitcoin SV has been indefinitely removed from the Sarson Funds investment universe.

Please contact us directly with any questions concerning this policy update.

Warm regards,

John Sarson & Jahon Jamali

Managing Partners

Sarson Funds

Enterprise Ethereum Alliance (EEA) Rolls Out Real Estate Industry Guidelines

The EEA Real Estate Special Interest Group (SIG) recently released a set of use cases around blockchain and real estate. The group, which is made up of 50 international real estate leaders known for championing technology in the field, developed the document to highlight areas in which blockchain can improve customer interactions, speed up transactions, and create more efficient business models in the industry. The publication features use cases covering:

  • Token Securitization
  • Land Registries and Cadastrals
  • Token-Enabled Marketplaces
  • Standardized Property Data
  • Tokenization of Real Estate
  • Sales Process Optimization
  • Real Estate Management
  • Property Identification, Listings, and Data

To read the full report, click here.

Coinstar Expands to 2,200 Locations After “Overwhelming” Bitcoin Demand.

That Coinstar machine at your local grocery store is now an easy spot for anyone looking to get into the crypto market. Many of the coin-counting machines where we all have been dumping our jars full of pennies, now sell bitcoin.

Users simply press “Buy Bitcoin,” agree to the transaction terms, and insert their cash (up to $2,500). They will then receive a voucher with a code that can be used at Coinme.com. Coinme is a blockchain fintech company that became the first licensed bitcoin kiosk company in the U.S. in 2014. There are currently Coinstar/Bitcoin machines in 21 states, and Coinme says the service is being added to more kiosks each week.

AT&T Embraces Bitcoin Bill Payment

AT&T recently announced customers can now use cryptocurrency to pay their bills online using BitPay, a cryptocurrency payment processor.

Customers just have to select “BitPay” as an option to pay when they log into their account. This move makes AT&T the first mobile carrier to accept crypto as payment. The past month has seen other major retailers and companies accepting crypto for payment such as Bed, Bath & Beyond, Whole Foods, Crate & Barrel and Nordstrom.

John Sarson Talks Bitcoin, Libra, and Cyrptocurrency’s Rise on Money Life with Chuck Jaffe

Managing Director and Founder of Sarson Funds, John Sarson, recently spoke with Chuck Jaffe on the finance and investment show Money Life. John and Chuck covered Facebook’s new coin, Libra, Bitcoin’s continued growth, and Sarson Funds’ large and small coin funds for investors. To listen to John’s interview, click here.

John’s Money Life conversation added to the heightened media coverage this past week around cryptocurrency and also contributed to Sarson Funds’ persistent effort to provide Wall Street-grade investment education in the cryptocurrency space. To learn more about cryptocurrency and blockchain download the Digital Asset Investor Guide created by Sarson Funds.

This Week in Crypto

Facebook’s Libra Comes Under House Scrutiny

This week on the Hill Congress questioned David Marcus, head of Facebook’s Calibra initiative on the social network’s proposed new cryptocurrency, Libra. Lawmakers tried to get a handle on how the federal government could monitor and manage this new payment system that could potentially allow users to easily transfer money. Facebook says the new coin will help those who may not be able to afford or don’t have access to a traditional bank. Marcus told lawmakers Facebook will wait to launch Libra until they have addressed all regulatory concerns.

Japan to Create New Crypto Trading Platform

The Japanese government recently announced plans to develop a new international cryptocurrency trading platform to help prevent money laundering through digital assets. The new network would be similar to the SWIFT network currently used by banks to send money around the world. In 2017 Japan became the first country to regulate cryptocurrencies. The developers plan for the platform to be operational in a few years.

Commodity Futures Trading Commission Investigating BitMEX

The Commodity Futures Trading Commission (CFTC) recently launched an investigation into cryptocurrency exchange BitMEX, and whether the exchange allowed American users to trade on the platform. In January BitMEX CEO Arthur Hayes said the exchange removed anyone from the US from its platform, however, he agreed that users could hide their true location through a VPN.

Sarson Funds Educates Advisors at The Money Show’s 2019 Chicago TradersEXPO

Cryptocurrency was a hot topic at this week’s Money Show‘s TradersEXPO in Chicago, with Sarson Funds sharing highly sought-after expertise with financial advisors looking for guidance on safely and securely investing in this new asset class for their clients.

Managing Partner and Founder of Sarson Funds, John Sarson presented on cryptocurrency security and implications for financial advisors at the expo. John’s presentation, “Secure Cryptocurrency Investing: A Practitioner’s Perspective,” provided financial advisors with an in-depth overview on the critical and unique safeguards that individual investors and financial professionals alike should employ to securely invest in cryptocurrencies and digital assets.

Investment professionals who visit SarsonFunds.com can download the Digital Asset Investor Guide free, as well as view the Blockchain Insider Report, a weekly discussion and analysis from digital asset traders and professionals around recent trends and news in the industry. The entire suite of educational materials created by Sarson Funds combines Wall Street-grade research with expert-level analysis on digital assets. The materials are written for the investment professional to both advance their knowledge and to educate their clients who may be interested in this emerging asset class.