Japan Wants to Rival SWIFT With a Cryptocurrency Network

                             

Japan is a prominent country for blockchain and cryptocurrency activity.

So much even that government officials are building a new type of infrastructure. It is labeled as the “SWIFT of cryptocurrency”, although living up to those expectations won’t be easy. This new network will be used on an international scale and aims to thwart money laundering.

Japan Doubles Down

Over the past few years, Japan has become a key region for cryptocurrencies. It is one of the few countries to openly embrace this form of money and legitimize it. Several of the country’s biggest stores accept Bitcoin payments directly as well. This further goes to show Japan firmly believes Bitcoin is here to stay. Regarding altcoins, the situation is a bit less clear. Alternative markets are always hit-and-miss in every part of the world. To improve upon the existing situation, a new project is under development. The Japanese government confirmed it aims to build an international network for cryptocurrencies. This network is designed to mimic SWIFT in terms of cross-border partnerships and access. However, it will seemingly have little or nothing to do with traditional banks in that sense. It is evident that this new project will be very different from what the world has seen to date. 

Global Collaboration

Based on the little information provided to us, it seems the goal is to develop this project in conjunction with other countries. Which countries those would be, has not been communicated at this time. The Financial Action Task Force of Japan will set up a team dedicated to monitoring the development of this new network. How all of this infrastructure is designed to operate, remains a big mystery. Not too many details are known at this time. We do know the FATF approved a plan to establish a new network in June of 2019. At that time, there were rumors regarding the involvement of cryptocurrencies. Those rumors have now been confirmed. By claiming this network will rival SWIFT, high expectations are associated with it. Delivering on those expectations will not be easy by any means. 

Legitimizing Cryptocurrency One and for all

One thing is adamantly clear. Japan wants to push global cryptocurrency adoption to a new level. The main focus lies on bringing more security to this nascent industry. By actively addressing money laundering concerns, a crucial first step is taken in the right direction. Japanese officials also hope this network will stimulate economic growth in the country and beyond. Regulation and cryptocurrency make for an interesting combination. A lot of Bitcoin enthusiasts aim to keep these apart as much as possible. Others see merit in regulating this industry. How this SWIFT rival will factor into all of this, is a guessing game at best. It is certainly something worth keeping an eye on in the years to come.

Article Produced By
JP Buntinx

https://themerkle.com/japan-wants-to-rival-swift-with-a-cryptocurrency-network/

David https://markethive.com/david-ogden

                                   

 

Buffet won handily. It’s not that Buffet didn’t think there were capable investment managers out there;

Buffet’s Berkshire Hathaway has often been described as a giant hedge fund. Instead, his confidence relied on his intuition that between fees and trading costs, even the best hedge fund managers would struggle to beat a low-cost index fund. We might logically assume that crypto hedge funds, which generally have a 2 and 20 fee structure similar to that of their traditional counterparts, would suffer a similar fate.

But since the beginning of 2017, when reliable data became available, the result has been quite the opposite. An equal-weighted index of crypto funds significantly outperformed bitcoin and most other crypto assets. The CFR Crypto Fund Index tracks more than 40 crypto funds, mostly hedge funds, across a variety of strategies. It shows that even as bitcoin climbed about 1,000 percent between January 2017 and June 2019, crypto funds gained more than 1,400 percent. The outsized performance of crypto funds over this period might puzzle the Oracle of Omaha, a man who once described bitcoin as “rat poison squared.” Even without Buffet’s bias against crypto or hedge funds, there are a few reasons one might be surprised:

• Performance fees are by nature punitive to returns during bullish periods
• Creating a portfolio that can outperform skyrocketing single assets is no small feat
• Crypto fund managers tend to be less experienced than their traditional counterparts

Despite these apparent headwinds, crypto funds did outperform. So let’s examine these perceptions a bit more.

Performance fees are too punitive in bull markets

Few investment assets have ever experienced a 12-month bull run like that of crypto assets in 2017. That’s fantastic for fund managers taking home 20 percent of profits, but certainly eats away at returns. Several crypto funds returned more than 1,000 percent in 2017 – meaning by year-end a fund manager could have taken home more in fees than the fund had assets to start the year.

Still, most crypto funds have a 2 and 20 fee structure similar to traditional hedge funds and many have high water marks (essentially to ensure managers don’t get paid for performance when a fund is below all-time high). So while crypto fund performance fees have been staggering in absolute terms, the fee structure is no more of a hindrance to crypto funds than to traditional hedge funds.

Diversified portfolios struggle to keep up with single assets

It’s hard to imagine any asset overshadowing bitcoin’s 12x performance in 2017. But that’s exactly what happened. Some other coins were up 100x or more. The Bitwise CCI 30 Index, which measures the performance of the top 30 cryptocurrencies by market cap, was up 42x. So how exactly did crypto funds outperform during 2017? They didn’t. Not even close.

Crypto funds collectively returned a relatively underwhelming 1,000 percent. Sure, these funds returned more in 2017 than traditional hedge funds have in the past 20 years. But everything is relative. And relative to top cryptocurrencies, crypto funds had a disappointing year. The story of crypto funds’ outperformance truly began when crypto winter cast a chill over the entire industry in 2018. Philanthropist and investor Shelby Cullom Davis said: “You make most of your money in a bear market, you just don’t realize it at the time.” It was one heck of a bear market.

In 2018, bitcoin lost nearly 75 percent of its value. The CCI 30 Index lost 85 percent. The CFR Crypto Fund Index, however, was down “only” 33 percent. Or put another way, while crypto funds preserved 4/6 of their value, the CCI 30 maintained less than 1/6 of its value. As the chart above shows, this ability to preserve capital during 2018 propelled the crypto fund index ahead of bitcoin and other cryptocurrencies. From Q1 2017 through Q2 2019, the CFR Crypto Fund Index has returned 1,430 percent. This easily bests bitcoin’s 1,022 percent return and narrowly surpasses the 1,413 percent of the CCI 30.

Crypto funds lack experience

After overcoming their fee structures and whipsawing crypto markets, crypto fund managers had a final hurdle to overcome: inexperience. It’s difficult to directly compare the total financial experience of managers across disciplines. However, we can look at the average age of funds. A recent study published by Loyola Marymount University (LMU) found the median age of traditional hedge funds was 52 months. This is a lifetime in the crypto world. No crypto funds in the CFR index have been operational for 52 months and the median age is just 16 months.

This inexperience should hurt crypto fund returns, right? Not necessarily. Somewhat counterintuitively, the same LMU study found traditional hedge fund returns decrease with age. And not by a negligible margin. Hedge fund returns in year one were more than triple those in year five. After year five, the study found, “some funds become liquidated and the pattern is somewhat mixed.” So inexperience, which would seem to be a significant headwind for crypto fund managers, may actually have been a tailwind propelling their performance past ahead of bitcoin and other benchmarks.

Reasons for caution

That crypto funds have outperformed various benchmarks is encouraging. But there’s also plenty of reason for institutions to remain cautious. The index covers barely one market cycle. Buffet’s index fund didn’t take the lead over hedge funds until year four of the ten-year bet. The index has less than 50 constituent funds. While the largest in the industry, it’s quite small compared to traditional hedge fund performance indices which can include thousands of funds.

There are potential biases. Since reporting is voluntary, and the index includes less than 20 percent of eligible funds, we can reasonably assume that poorly performing funds are less likely to report. Funds with particularly poor performance might have already closed, creating a potential survivorship bias. Though not unique to crypto fund indices, these biases shouldn’t be overlooked by investors. Most crypto funds are quite small by traditional standards and it’s quite possible some strategies that perform well in illiquid markets will not support the same type of returns with more capital invested. Bridgewater Associates, the world’s largest hedge fund manages over $100 billion. Crypto funds manage less than $20 billion collectively.

Despite the potential issues, it’s encouraging that crypto hedge funds seem to have done more or less what they are supposed to, namely preserve capital in bear markets. And with the majority of crypto funds in the index now employing outside auditors, custodians and fund administrators, the industry is becoming less haphazard. The crypto fund industry is still very much in a maturation phase, but with proper due diligence, crypto funds may present institutions, particularly those unwilling or unable to directly custody cryptoassets, an appealing way to get exposure to the sector. Some decentralized architecture is said to have an “Oracle Problem”, but at least so far, crypto funds don’t seem to have an Oracle of Omaha problem.

Article Produced By
Josh Gnaizda

Josh Gnaizda of Crypto Fund Research looks into possible reasons behind the relative performance of crypto funds vs bitcoin since Q1 2017.

https://www.coindesk.com/crypto-funds-are-outperforming-you-shouldnt-be-surprised

David https://markethive.com/david-ogden

Why Are S Korean Crypto Projects Going Cool on Domestic Exchanges?

                                

South Korean cryptocurrency projects are abandoning domestic exchanges

in favor of overseas platforms, per a new report. Fn News states that some of the country's newest crypto projects are looking to list in “hotter” markets, such as Singapore and the United States. The bear market of 2018 took a near-fatal toll on many of South Korea’s exchanges, with crypto fever soon turning into a massive slowdown that – despite a recovery in 2019 – has failed to reignite the domestic industry. The industry comprises some 200 exchanges. The report makes note of three factors it says are driving the change:

Low trading volumes in South Korea

Per Fn News’ calculations, only five of the global top 100 exchanges (by trade volumes) are now based in South Korea. “It is no exaggeration to say that outside the market leaders, 97% of domestic exchanges are in danger of closure due to low trading volumes,” author Kim So-ra writes. The news outlet quotes a crypto project CEO as stating, “We were discussing a possible listing with the Prixbit exchange on August 7. Then, two days later, we read in the news that it was closing down!”

Regulatory difficulties

Banking remains a very thorny problem for South Korean exchanges. The country’s “big four” exchanges – market leaders Upbit, Korbit, Bithumb and Coinone – have agreements with major commercial banks that allow them to adhere to government guidelines that require users to verify their accounts with real names and social security numbers. They have also agreed to abide by guidelines that require corporate and customer accounts to be handled separately.

And there are signs that the “big four” are now set to ramp up their restrictions on customer activities yet further, possibly moving as a response to government pressure. Smaller exchanges, however, would prefer to use their corporate accounts to conduct the entirety of their banking activities. This has led to accusations that “blind spots” can appear in crypto banking operations – a factor that leads many banks to reject trade with smaller cryptocurrency exchanges.

Overseas exchanges are looking for South Korean customers

Many platforms are now actively wooing South Korean projects and investors, adding Korean won markets. The report makes mention of exchanges like BW, which already lists South Korean projects Ziktalk, Storychain, PayExpress and Sigma Chain, and plans to open won trading “later this month.” The Singapore-based company began offering transaction fee-free deals to South Korean customers last week to celebrate Korean Liberation Day (August 15).

Watch the latest reports by Block TV.Much-talked about projects like MediBloc, Bezant and Temco are also listing outside South Korea.The Singapore-based Bitholic exchange – soon to rebranded as Bithumb Singapore – also has a “number of domestic blockchain project portfolios” among its listings, notes Kim.A number of South Korean-owned exchanges are actively pursuing overseas expansion – with all four “big four” exchanges opening branches in either the United States or other Asian cities in recent months.

Article Produced By
Tim Alper

Tim Alper is a British, South Korea-based journalist, a regular contributor to Cryptonews.com, who covers cryptocurrency and blockchain related news daily, writes in depth analysis pieces about the latest trends in the cryptocurrency and blockchain space. Tim has over 12 years of media experience. He has written for the BBC, the Guardian, the Jewish Chronicle, Chosun Ilbo and many other media outlets, covered cryptocurrency and blockchain related news. He has also collaborated on media projects with the likes of Samsung, Sony, LG, Hyundai, Korean Air, TÜV SÜD and Shell.

https://cryptonews.com/news/why-are-s-korean-crypto-projects-going-cool-on-domestic-exch-4470.htm

 

 

David https://markethive.com/david-ogden