Crypto Regulatory Update: OCC Guidance Indicates Crypto is Here to Stay

Sarson Funds Crypto Regulatory Update

Sarson Funds Crypto Regulatory Update

Cryptocurrencies are here to stay in 2021. As the ecosystem reaches a $1 trillion total market capitalization, Bitcoin tests new all-time highs, and Wall Street institutions get involved, one thing is clear: crypto isn’t going anywhere. In fact, crypto’s lure over the investment community and financial institutions is forcing regulators to discern proper means of integration as the universal benefits are now unavoidable. As the ecosystem grows, we expect an influx of positive regulatory guidance to surface throughout 2021, making way for yet another decade of crypto domination.

Our hopes for an insurgence of positive crypto regulation derives mostly from the work of former Acting Comptroller of the Currency at the OCC, Brian Brooks, and his efforts to spur nationwide acceptance of crypto assets during his time in office. Formerly the Chief Legal Officer of Coinbase, Brooks focused significant efforts as Acting Comptroller of the Currency to clear a path for widespread crypto adoption.

“Nobody’s going to ban Bitcoin,” Brooks said in a statement on CNBC’s Squawk Box,” later saying, “We’re very focused on getting this right. We’re very focused on not killing this… And it’s equally important that we develop the networks behind bitcoin and other cryptos as it is that we prevent money laundering and terrorism financing.” Brooks concluded by saying to expect more regulatory clarity in the first few months of 2021.

Brooks’ acknowledgement of the need to develop the use cases for blockchain technology gives us hope that financial regulation will soon shape around cryptocurrencies to prevent fraudulent activities on the blockchain, making for a straighter pathway for universal adoption. 

Brooks has been one of the most influential inside advocates for cryptocurrency adoption over the past year. In an interview at October’s DC Fintech Week, Brooks claimed that decentralized finance will soon replace traditional banking services, adding, “decentralization is very likely an unstoppable force out there. Decentralized networks, by definition, are cheaper, faster, and more resilient than any kind of centralized structure.” As internal recognition of the potential of decentralized finance occurs, we expect greater regulatory clarity for decentralized financial services as banks and large scale financial institutions establish their positions in the space.

Finally, in one of Brooks’ most recent statements, he gave permission for federally chartered banks and financial institutions to build, issue, and use stablecoins for payment activities as well as participate as transaction validators on the blockchain. Brooks’ guidance opens up an entire new horizon for banking capabilities through stablecoins and gives us great hope that further guidelines for large scale crypto use will follow.

While Brooks’ stay in the Office of the Comptroller of the Currency was a short one, much of his work gave the crypto community an inside look on what is to come for crypto regulations in near future, giving us hopes of yet another decade of crypto dominance as an asset class.

By Liam McDonald

Crypto Basics: How to Buy Bitcoin

Sarson Funds: How to Invest in Bitcoin - Cryptocurrency Financial Advisor

Sarson Funds: How to Invest in Bitcoin - Cryptocurrency Financial Advisor

As Bitcoin and the digital asset ecosystem continue to reach all time highs, investors are being awakened to the true value of crypto assets. As newcomers gain interest, the most frequently asked question has become: how can I buy Bitcoin? This article will provide a step-by-step manual on how to invest in cryptocurrencies and the various elements to consider before investing.

First, every investor should consider how they would like to invest: individually or with a digital asset manager. You should invest individually if you believe you have a firm grasp on the various tokens throughout the ecosystem and would like to diversify your holdings based on your own strategy and methodology. Investing individually would provide you the freedom to invest and own various tokens on your own, versus owning a portion of a larger-scale investment strategy. If you are new to the crypto space and are looking to join in on the fun without knowing much about individual coins, or would rather entrust professional portfolio managers to drive returns for you, then you should choose a digital asset manager and a specific strategy that fits your investing interests.

To invest individually, you must first choose how you’d like to invest. If you are simply looking to own Bitcoin, a very basic entry point would be to invest through a Bitcoin ATM, which are widely available in grocery and convenience stores across the United States. These ATMs allow you to buy Bitcoin with cash, debit and credit cards, and most allow the sale of Bitcoin in return for cash on your card. Purchasing and selling Bitcoin through an ATM will provide you with a paper wallet and a private key password to keep your Bitcoin safe. This paper wallet must be kept safe and secure, as loss of this wallet and the private key would mean a total loss of the assets stored on these until the address and private key are recovered. If you already have a Bitcoin wallet, you can scan the QR code of the wallet or provide its address to send the Bitcoin straight to your pre existing wallet.

If you’d like to actively trade Bitcoin and other digital assets, as well as track their progress and keep up to date with the ecosystem daily, we recommend purchasing Bitcoin through a crypto exchange. First, you must decide what type of investor you are looking to be. If you are simply looking to trade and keep up with crypto whenever you can, we recommend setting up an account with Coinbase, Gemini or Kraken. If you are looking to be a more sophisticated investor, Binance US offers real time analysis and price trends, giving investors the ability to witness active and past trading candles as well as buys/sells coming through the platform. Access to these price trends and real time market activity provides investors insight into where Bitcoin’s price will move in the short term.

Once you have decided which exchange will give you the capabilities you need, it’s time to set up an account. Setting up an account on a crypto exchange requires investors’ information for proper KYC background checks. This will require a government issued ID, a bank account to source money flows, and an onboarding process for account verification. Once your account is set up, you are free to invest on the platform.

Purchasing Bitcoin and other digital assets on crypto exchanges is an easy process. You simply look up the coin you would like to invest in, then select the dollar amount of the coin you would like to purchase (crypto assets can be bought in small parts, so you do not need to buy a whole coin), and confirm the purchase to finalize the transaction.

Once you own your coins, it is crucial to know how to protect them. Keeping your coins on exchanges is the simplest way to consolidate your assets in one place, but if you want true ownership of your tokens, you must own and control the private key to your wallet, which acts as a password to gain access to your coins. When your coins are located on exchanges, you do not truly own them because your private key passwords are stored on the exchange. When your private key is stored by a centralized platform, your coins may risk compromise if the platform is hacked. Thus, to ensure the true security of your tokens, we recommend taking your coins off of crypto exchanges and holding them on cold storage wallets like the Ledger Nano X.

At Sarson Funds, we aim to enable and empower our community to access the new age of financial freedom. To learn how to invest with a digital asset manager, stay tuned for our next segment of Crypto Basics. Until then, do what you came here to do and go buy some Bitcoin. Happy HODLing!

By Liam McDonald

Investing in Crypto: 5 Questions to Ask Your Financial Advisor

Crypto Questions to Ask Your Financial Advisor

Crypto Questions to Ask Your Financial Advisor

As Bitcoin and the digital asset ecosystem break past a total market cap of $1 Trillion USD, we want to be your resource for all things crypto. Thus, to help you along your digital asset discovery, we have compiled what we believe to be the five questions you should be asking your financial advisor about crypto.

  1. How can I invest in digital assets?
  2. What digital assets should I invest in?
  3. Should I invest with a digital asset manager or an exchange?
  4. What are the best educational resources to learn more about crypto?
  5. What strategies are driving the best returns?

As crypto emerges as the most lucrative new asset class in finance, it is crucial for your financial advisors to know how to best serve your digital asset needs. We are a crypto education, investment, and marketing firm that manages some of the highest-returning digital asset investment strategies in the industry. It is our duty to provide Wall Street-grade educational, investment, and marketing services to our community. If you have questions about how you to get involved in this exciting new space, please reach out to us – we are here to help.

By Liam McDonald

Market Update: Crypto Market Cap Breaks Past $1 Trillion

Crypto Market Cap Reaches 1 Trillion

Crypto Market Cap Reaches 1 Trillion

BREAKING: Last night, the entire crypto market cap broke past USD $1 Trillion. This escalation is indicative of the global pace of crypto adoption as Bitcoin, Ethereum, and crypto tokens around the ecosystem break past all time highs as the world is awakened to the true utility of digital assets. Fueled by the economic uncertainty posed by the COVID-19 pandemic and the macroeconomic response of countries worldwide, we expect this momentum to continue as regulation strengthens, Wall Street and global institutions validate the utility of crypto, and the world leans more and more on digital commerce. 

As global sentiment shifts to embrace crypto, we are here to educate the world on the power of the blockchain ecosystem and enable true financial sovereignty. Please reach out to us for educational inquiries and our recommendations on how to get involved in the next great shift in global finance.

By Liam McDonald

2020 in Crypto: Top Stories of the Year and a Look Towards the Future

Crypto 2020 - Sarson Funds Cryptocurrency Financial Advisors

Crypto 2020 - Sarson Funds Cryptocurrency Financial Advisors

Reflecting on a year that brought its handful of challenges, 2020 proved the importance of adaptation. Life in a digital world became inevitably crucial, and as changes in everyday life were made rapidly, the cryptocurrency ecosystem followed suit.

With more talk than ever surrounding the world of decentralized banking, we’ve compiled the top stories of 2020. 

Throughout the year, our team focused on understanding the importance of digital asset data security. With the emergence of quantum computing capabilities, we’ve identified Crown Sterling as one of the leading engineers of the future of quantum-resistant data security. Led by mathematician Robert Grant, Crown Sterling has created the first quantum-resistant digital asset, the Crown Sterling token. The token, protected by their new quantum-proof encryption algorithm, CrownEncryptOTP, provides lifelong protection of user-sensitive data. As cryptocurrencies grow vulnerable to quantum-hacking, this future-proof digital asset provides a pathway toward progressive and sustainable encryption advancement. 

In October, the crypto ecosystem welcomed PayPal into the space. The company announced they would be adding Bitcoin and crypto transactions to their payment options for users. CEO Dan Schulman hopes this change will drive momentum for PayPal’s 375 million users and registered merchants to become more comfortable with digital payments through the crypto ecosystem. Tech giants Square and Venmo followed suit with integrating buying, holding, and selling capabilities for cryptocurrencies. The commercial adaptation by large institutions is positively shifting public comfortability towards digital payments as they are continuously mainstreamed. 

Aside from the use of digital assets in big tech, Wall Street began to embrace Blockchain as well. Leaders in the finance world such as J.P Morgan, Guggenheim, and AllianceBernstein have all noted that cryptocurrencies are here to stay. Overcoming CEO Jamie Dimon’s 2017 claim that Bitcoin was a “fraud,” JP Morgan proceeded to release their ‘JPM Coin,’ in addition to their new branch for digital asset operations and custody services, Onyx. JPMorgan spearheaded the use of blockchain on Wall Street, and it is no surprise that Guggenheim and AllianceBernstein were so quick to follow as blockchain proves to be a profitable and efficient way to secure transactions without lag time or third-party interference. Bitcoin is becoming increasingly valued as a medium of exchange, as growing adaptation occurs on Wall Street and beyond. 

As Bitcoin continued to gain value with record-breaking prices, business intelligence company MicroStrategy bought  70,470 Bitcoin, a total of 1.1 billion dollars. CEO Michael Saylor says, “The acquisition of additional bitcoins announced today reaffirms our belief that Bitcoin, as the world’s most widely-adopted cryptocurrency, is a dependable store of value.”

A common saying for the new year: out with the old, in with the new. In the world of Fintech, rather, out with traditional financial services, in with decentralized banking. Brian Brooks and the OCC began emphasizing the cost effectiveness and efficiency of removing third parties. As we saw with the shift from postal services to email, instant and direct financial services solutions are now being provided by decentralized finance (Defi) platforms to simplify the future of banking. With Defi’s increasing capabilities, the entire banking system will soon be forced to adopt blockchain technology. 

In September, Kraken, one the largest US-based crypto exchanges, made history as the first digital asset company in the United States to receive permissions as a bank charter. The Wyoming-based Special Purpose Depository Institution will offer depository, custody, and fiduciary services for cryptocurrencies. The integration of both banking efforts along with crypto services is projected to expand into a variety of initiatives including cryptocurrency debit cards, mobile banking, etc., paving the way for regulatory adoption from banks everywhere.

In the last month of 2020, the SEC filed a lawsuit against Ripple Labs. The company had raised over $1.3 billion dollars through the sale and distribution of XRP, which was recently declared an unregistered security.  XRP is one of the largest and most valuable coins in the crypto industry, known for its rapid speed and accessibility in over 50 countries. The SEC plans to ban Ripple’s ability to participate in XRP’s market trading. The case is being referred to as “the crypto trial of the century.” 

In 2021, we expect the pace of crypto adoption and innovation to continue as competition from big tech grows. Crypto’s integration into banks and the strengthening of regulation will add to the continued growth of the ecosystem,  making for 2021 to be another year of crypto’s outperformance of traditional finance.

By Liam McDonald

A Breakdown of the Crypto-Currency Act of 2020: What Investors Need to Know

Introduced in draft form to the House of Representatives on Friday, December 20, 2019, the much anticipated Crypto-Currency Act of 2020 makes significant progress towards clarifying the regulatory framework surrounding Digital Assets.

You can read the entire bill here and find our analysis below.

Click here to download the Sarson Funds Crypto-Currency Act of 2020 Investor Infographic (above).

Crypto-Currency Act of 2020 Summary:

The legislation does not create any new regulatory agencies.  It separates Digital Assets into three broad categories and assigns an existing regulatory body to each of the below categories:

Crypto-currencies: These tokens are defined as representations of US currency and are “reserve-backed digital assets” such as “stablecoins” that are collateralized by synthetic or physical assets held in a “correspondent banking account.” This category would be the smallest of the three categories.

Regulator: Financial Crimes Enforcement Network (FinCEN)

Coins Included:  TrueUSD (TUSD), USD Tether (USDT), Paxos Standard, (PAX),  USD Coin, (USDC)

Crypto-commodities: These tokens are based on commodities or other “economic goods or services.”  This category encompasses the majority of existing cryptocurrencies and would include smart contract platforms such as Ethereum, EOS, Tron as well as “value transfer” cryptocurrencies like Bitcoin, Ripple’s XRP & Litecoin.

RegulatorCommodity Futures Trading Commission (CFTC)

Coins Included: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash

Crypto-securities: These tokens represent “debt, equity, & derivative instruments that rest on a blockchain,” including those governed by “smart contracts and collateralized by other [digital assets].”  This includes securities, real estate, investment funds or other capital assets with fractioinalized ownership. Projects supporting this protocol include Tezos, tZero, Bancor, and Vertalo.

RegulatorSecurities and Exchange Commission (SEC)

Coins Included: Tezos, tZero, Bancor, and Vertalo

A Rapidly Closing Door for Privacy Coins:  

The Act requires that, “each agency shall issue rules to require each crypto-currency (including synthetic stablecoins) to allow for the tracing of transactions [emphasis added] in the crypto-currency and persons engaging in such transactions in a manner similar to that required of financial institutions with respect to currency transactions.

Regulator:                   Financial Crimes Enforcement Network (FinCEN)

Top Coins Included:      Monero,  Zcash, Dash, Verge, Horizon

The proposed legislation is a welcomed move forward as it provides a protective framework for businesses and institutions seeking to grow their engagement with cryptocurrency technology.  The Act’s final provision regarding “transaction traceability” provides long-awaited  safeguards against money laundering and criminal financial activity – the enabling of which was a criticism that cryptocurrency proponents have heard from the likes of Bill Gates and Donald Trump and have long sought to shed.  This requirement would bring the United States into cohesion with Europe’s FATF’s new“travel rule” which requires reporting on crypto transactions greater than $1000 and would effectively be a death-blow for privacy-centric cryptocurrencies in the United States.

Speaking on behalf of ourselves and other firms building businesses around cryptocurrencies, we applaud Representative Paul Gosar (R-AZ) and his team for the well written legislation.  It is in line with recommendations that we have been offering since 2017 and that we believe are the foundation upon which crypto-businesses in the United States will be built.

You can learn more about how regulation is shaping the adoption of Cryptocurrency by checking us out at www.sarsonfunds.com/education.

Christmas Comes Early to Cryptocurrency Firms: The Crypto-Currency Act of 2020

Cryptocurrency Act of 2020

The much anticipated Crypto-Currency Act of 2020 was introduced in draft form to the House of Representatives on Friday, Dec 20, 2019.

Hardly six pages in length, the proposed Bill makes significant progress towards clarifying the regulatory framework surrounding Digital Assets, though we hope lawmakers remove the atrocious hyphen within “Crypto-Currency” prior to a vote by the full House floor.

Speaking on behalf of ourselves and other firms building businesses around cryptocurrencies, we applaud Representative Paul Gosar (R-AZ) and his team for the well written legislation.

You can read the bill here and find our analysis below.Cryptocurrency Act of 2020

Crypto-Currency Act of 2020 Summary:

The legislation will not create any new agencies, but rather assigns an existing regulatory body for oversight based on a newly proposed federal classification of Digital Assets into three broad categories. Those categories and their corresponding federal regulator are below:

    • Crypto-commodities: These tokens are based on commodities or other “economic goods or services. We believe this would encompass “Utility Token” blockchain projects such as those related to medical records, identity, webservices etc.Regulator: Commodity Futures Trading Commission (CFTC)
    • Crypto-securities: These are tokens that represent “debt, equity, and derivative instruments that rest on a blockchain,” including those governed by “smart contracts and collateralized by other [digital assets].”  We believe that this would include smart contract platforms such as Ethereum, EOS, and others, especially when used to transact value (as opposed to record data). Bitcoin and other “value transfer” cryptocurrencies would fall into this category.Regulator: Securities and Exchange Commission (SEC)
    • Crypto-currencies:  These tokens are defined as representations of US currency and are “reserve-backed digital assets” such as “stablecoins” that are collateralized by synthetic or physical assets held in a “correspondent banking account.” This category would be the smallest of the three unless expanded to include tokenized real assets such as Gold and Real Estate based cryptocurrencies.Regulator: Financial Crimes Enforcement Network (FinCEN)

The Bill continues saying, “each agency shall issue rules to require each crypto-currency (including synthetic stablecoins) to allow for the tracing of transactions in the crypto-currency and persons engaging in such transactions in a manner similar to that required of financial institutions with respect to currency transactions.

The proposed legislation is a welcomed move forward, as it provides a protective framework for institutional allocation as well as safeguards against money-laundering and criminal financial activity – a cloud that cryptocurrency proponents have long sought to shed.

We anticipate this to be the official (and long anticipated) death-blow for privacy-centric cryptocurrencies such as Monero and Zcash that had historically run afoul of regulators with their claims of anonymous financial transactions.

 

China Lands First Blow in Global Blockchain Wars

As lawmakers jockey to chastise technology leaders like Facebook’s Mark Zuckerberg (for the dastardly future crime of earning potential profits by providing a payment service to millions of people), America’s greatest economic foe, China, has quietly built a substantial lead in the race for leadership in technology’s newest battleground: Blockchain Technology.

This was an exciting week for cryptocurrency holders. Bitcoin prices surged as much as 40% Friday after China’s Xi Jinping urged his fellow citizens to “seize the opportunity” afforded by blockchain technology. The Chinese leader’s statements on blockchain are believed to be his first in-depth remarks on the technology. His comments stressed the importance of stepping-up research on the standardization of blockchain to increase China’s influence and rule-making power in the global arena.

2019 has been a busy year for China. While the United States bemused itself with bipartisan bickering, China quietly pursued global leadership in blockchain technology. During the year, China successfully moved nearly their entire population off of paper money and onto digital currency solutions. This change affected Chinese citizens of all economic levels. Even panhandlers on the streets of Beijing no longer solicit coins and bills, they instead display their QR code for donations to their digital bank accounts.

China’s central bank also announced a verification system this week called the Certification of FinTech Products that will certify 11 types of financial technology hardware and software widely used for digital payments and blockchain services. This initiative follows a year-long public education campaign where China’s central bank published and disseminated pamphlets and other educational materials heralding the benefits of digital currencies and explaining the capabilities of blockchain technology to streamline commerce and fight corruption.

China’s intention of dominating this new technology has been made clear – first with covert foundational initiatives and now overtly with President Xi’s announcements and the sponsoring of these programs. This is all advantageous for a command economy like China, which can now recapture lost innovation through streamlined implementation, a phenomenon now materializing. Washington’s struggles with endless equivocation and ineffectiveness reflects the Western world’s general indecisiveness, allowing China to establish itself as the global blockchain technology and cryptocurrency leader.

Blockchain technology stands poised to rebuild the way that data, digital assets and currencies move around the globe. The global financial landscape will be restructured to reflect the immutability and instant transferability of blockchain-based assets and currencies. Gone are the days of waiting for third-party transaction validations. Goldman Sachs, Fidelity, IBM, The Bank of England, The Bank of Japan, the ECB, the Federal Reserve and the IMF have all commented on the inevitability of this changing paradigm, but no operator has gone as far as the Bank of China to position itself as a leader for this coming reality.

The Chinese government has moved forward with formal policy to ready itself and its population for a digital economy, passing a new law (effective January 1st) aimed at “facilitating the development of the cryptography business and ensuring the security of cyberspace and information”. Among other things, this law also makes it illegal to falsely claim that blockchain technology is fraudulent. The new legislation, and indeed President Xi’s comments, were anticipated by many as China readies the country for the launch of its state-backed cryptocurrency – which is expected as soon as December.

When we finally see the inner workings of China’s national cryptocurrency, we can be certain that its blockchain architecture will likely be a long way from the decentralized, trust-less principles upon which Bitcoin, Ethereum and other public blockchains are based.

China’s interest in the space appears to have had a positive impact on already established cryptocurrencies like Bitcoin, by adding global legitimacy to the cryptocurrency industry overall. Only time will tell the true cost of America’s war on its innovators. China has taken the first steps toward dominating the future of the internet and of finance. The first shots in the “Blockchain Wars” have been fired and America barely noticed.

John Sarson

Managing Partner & CIO

Institutional Cryptocurrency Adoption Grows as CME Bitcoin Futures See Record Growth

CME Group Inc, the world’s largest futures exchange, continues to see record growth in Bitcoin Futures.

According to the recently released CME Report, greater Bitcoin market adoption led to robust volume of 5,534 contracts traded per day in Q3, +10% vs. Q3 2018 and higher than all previous quarters except Q2 2019.

Importantly, the report noted, institutional flow remained strong with 454 new accounts added, compared with 231 added in Q3 2018 (+97% growth).

CME noted that this means Bitcoin futures can provide right-sized liquidity when your need it, allowing market participants globally to efficiently hedge bitcoin risk on a trusted platform.

These were some of the notable highlights from CME’s report:

  • Average daily volume (ADV) was 27,670 equivalent bitcoin or ~$289M notional value
  • Record OI of 6,128 contracts (30,640 equivalent bitcoin) achieved on July 1
  • Record number of LOIH, or entities that hold 25+ BTC, hit a record high of 56 on July 9.
  • ~50% of BTC volume was traded outside the U.S., with ~26% coming from APAC and ~21% from EMEA.
  • 3,400+ unique, active accounts have traded since launch

*CME Reports that’s data is accurate as of 09/30/2019.