E-Crypto News talks to Kell Canty of Verady and Erin Friez of Digital Asset Research on Institutional Crypto Assets

 

We may be entering the era where institutional crypto assets players may become more important than the retail players of the crypto space.  Recently, Verady the digital portfolio tracking company entered a partnership with Digital Asset Research. Digital Asset Research is the premier digital assets data provider for institutional clients.

E-Crypto News reached out to both executives from both companies to find out if institutional players are the next big thing in the crypto space. Here is what they had to say.

Kell Canty, CEO Verady

E-Crypto News:

  1. Congratulations on your new partnership! What advantages will be gained from it?

Digital Asset Research leads the market in assessing digital currencies and assets. This partnership allows Verady to offer clean, institution grade pricing ledgible clients with institutional requirements.

By offering options to our clients, we can give them more ways of finding value and accurately complete the accounting as well as short and long term cryptocurrency activity for the institutional investor.

E-Crypto News:

  1. What are your thoughts on institutional participation in the crypto space?

Institutional participation is growing very rapidly, and is very good for the ecosystem. They have the ability to dramatically scale participation to levels which will continue to drive innovation.

E-Crypto News:

  1. Are we going to see increased adoption of cryptocurrencies because of institutional participation in the crypto space? Please tell us your reasons for this.

Yes. If you think about it from a risk-to-value realization perspective, any action which reduces risk is likely to increase the value realization potential.

Institutional participation will inherently focus on reducing risk for themselves and customers.

They will also likely offer streamlined access and experiences in tune with traditional financial expectations.

E-Crypto News: 

  1. What are the best uses of Digital Asset Research’s (DAR) capabilities?

Whether for regulatory or client reasons, there will be a need for a ‘clean’ pricing data.

Market manipulation is still a major concern in some instances, and the process DAR has developed is the answer.

E-Crypto News: 

  1. What are your thoughts on the taxation of cryptocurrencies?

The IRS continues to crack down on those who avoid paying taxes on virtual currencies.

Just this week the first sentence of evading taxes on virtual currencies was issued. Professionals need to get up to speed on crypto and they need to do so quickly.

It’s still a complex and evolving topic, and the uncertainty doesn’t favor the taxpayer. It is no longer a question of ‘if’, but how.

How to do it and how much will it be. The key now for taxpayers is to start reporting.

Tax Professionals and Accountants are recognizing the need and are gearing up to support and advise their clients.

E-Crypto News: 

  1. How can privacy-oriented cryptocurrencies be taxed? Is it possible? Please tell us the reasons for your answer.

It’s really an audit and enforcement issue more than a tax issue, and tax authorities are pretty good at determining when fraud or avoidance is taking place.

The likely first approach will be to increase informational reporting requirements (think 1099s) on exchanges or similar institutions where trading takes place.

This obviously won’t solve for direct or peer-to-peer trading, but could serve to reduce the non-compliance.

E-Crypto News: 

  1. How can the current rules and regulations regarding cryptocurrency taxes be improved?

A recognition of the use case of stablecoins for payments and an exception for that use case should be made.  Also a de-minimis exception should be passed.

E-Crypto News: 

  1. Do you think that institutional players in the crypto space will become the new whales? Please tell us the reasons for your answers.

By the traditional definition, it’s possible. Supply and demand are still key. The fixed supply of some cryptos could work against them accumulating too large a position before demand starts to wane.

E-Crypto News: 

  1. Do you think that exchanges manipulate digital asset prices? Please tell us the reasons for your answer.

Established credible exchanges, no. Second tier exchanges or participants trading on exchanges, potentially so.

It’s not dissimilar to traditional stock exchanges where bad actors attempt to move the market to their advantage.

E-Crypto News: 

  1. How will cryptocurrencies be taxed in ten years’ time? Give us a crystal ball view of this.

The biggest wildcard here is how governments respond to increased adoption. Tax enforcement is about collecting revenue for the government.

Tax policy is about financially incentivizing tax payer behavior. This is why there are ‘tax breaks’ supporting individual home ownership and business investment in economically challenged areas.

If cryptocurrencies are embraced as driving growth and efficiencies, we’re likely to see policies aimed towards reducing the current tax disadvantages to buying a cup of coffee with crypto.

Conversely, if they are somehow a threat, increasingly unfavorable tax treatment is possible.

E-Crypto News: 

  1. Will financial accounting systems change in the next ten years? Give us your idea of what they will be like then. 

Change is much more likely here. There are simply too many efficiency gains for businesses to ignore.

Cryptocurrency adoption, smart contracts and specific use blockchains will eliminate much of the manual inefficiencies in business operations.

We’ve all experienced the gains from computerizing financial accounting over the past 50 years. Truly ‘digitizing’ these systems will be the next step.

Erin Friez , COO Digital Asset Research

E-Crypto News:

  1. Congratulations on your new partnership! What advantages will be gained from it? 

Market manipulation is a major concern in the crypto space, and it makes sourcing accurate pricing data a challenge for market participants.

DAR’s prices are calculated from reliable data sources that have been objectively vetted to ensure that trades represent economic activity between a real buyer and a real seller.

Offering DAR’s clean prices gives Verady clients a more accurate way to account for their crypto assets.

E-Crypto News:

  1. What are your thoughts on institutional participation in the crypto space?

Institutional participation in the crypto space has been continuing to grow over the last few years.

AUM across major listed fund products in the space has more than doubled in the last 6 months, and we are seeing more institutional investors buying digital assets as a hedge against inflation, like Paul Tudor Jones and Stan Druckenmiller.

A survey by Fidelity Digital Assets of nearly 800 institutional investors from the US and Europe found that 60% believes that digital assets have a place in their investment portfolios. We expect to see these trends continue and grow.

E-Crypto News:

  1. Are we going to see increased adoption of cryptocurrencies because of institutional participation in the crypto space? Please tell us your reasons for this.

That appears to be the case today.  As stated above, there are more and more institutional investors being vocal about participating in the space and there don’t appear to be many participants leaving.

With central banks printing money and a limited supply of other inflation hedges, it only makes sense that there will continue to be more buyers, which will lead to further adoption.

What we don’t know right now is what other forms that adoption will take and the regulatory response.

We’re seeing a new set of proposed regulatory frameworks in Europe and other jurisdictions that appear to provide much needed clarity, and some like China who are limiting participation in traditional crypto like Bitcoin in favor of state issued digital currencies.

E-Crypto News:

  1. What are the best uses of Digital Asset Research’s (DAR) capabilities?

DAR leads the market in providing transparent and objective market data to the crypto market participants and regulators.

DAR’s data set includes clean intraday and close pricing, indicators like market cap, free float and volume stats, market structure reports including price discovery analysis, a comprehensive industry taxonomy that groups digital assets by theme, and an events calendar that covers events affecting the digital asset ecosystem.

DAR’s data is used by asset managers, hedge funds, family offices, custodians, tech firms and other institutional clients entering the crypto market.

E-Crypto News:

5. Do you think that institutional players in the crypto space will become the new whales?

Please tell us the reasons for your answers. In time and with traditional assets digitized to be traded and managed on the blockchain or as crypto asset underliers, that’s inevitable.

There are simply more cumulative assets to be deployed and more motivation by institutional players to benefit from many of the technology benefits pioneered by crypto assets, such as 24×7 trading, faster settlement, market transparency, and smart contracts.

E-Crypto News:

6. Do you think that exchanges manipulate digital asset prices? Please tell us the reasons for your answer.

There are more than 350 digital asset exchanges in a globally fragmented market, each with different regulatory obligations, security and operational standards and compliance practices.

DAR’s vetting process looks at each of these exchanges against a set of criteria that is designed to determine which exchanges offer reliable pricing and trustworthy transactions.

This process is designed to exclude exchanges that may, either for nefarious reasons or due to an immature or inexperienced team, contribute to price manipulation in the space.

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