Block Seoul Day 1: Is cryptocurrency a new asset class?

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It is apparent how cryptocurrencies are starting to change the world and how people live today. And yet, there is not much sense of urgency among governments and regulatory bodies in most territories and jurisdictions as to how these new form of money can be technically defined and used by everyone.

On the 17th of September 2018, the first day of the Block Seoul 2018 conference, a panel of investors and innovators came together to discuss what cryptocurrency is and define whether it is an asset class. The Financial Times described an asset class as a broad group of security investments that tend to act similarly in different market conditions. Equities like stocks, bonds, and cash are all asset classes.

Among the panelists, BTCC co-founder Bobby Lee and Elmar Bob from Tech Alliances APJ agreed that cryptocurrency is an asset class. Bob shared, “I’ve been living and working in Japan for about 20 years. Japan has always recognized Bitcoin and cryptocurrencies as an asset class.” He added, “In fact, in Japan Bitcoin is legal tender so you can actually buy and sell goods with Bitcoin. Now, that’s kind of an important aspect because Japan is third largest economy in the world. It’s something we need to pay attention to.”

Lee agreed and shared the possible reason why countries all of the world seem to have challenges with creating and defining regulation for Bitcoin. “Bitcoin does not fit into any one of these (securities, equities, bonds, real estate, and precious metal). It has aspects of all five of these asset classes but I think Bitcoin cryptocurrency is a unique piece that’s why countries and regulations will have a challenge,” Lee explained.

For CITDEX’s Chris Cutler, however, cryptocurrencies are assets—but they’re not asset classes. He then raised a question: “How does it fit within the regulatory framework, in the legislation framework?”

According to Cutler, there is a rich history of how investment instruments are treated under tax rules. He said, “You’ll see different treatments for securities tokens offerings that distinguish them from utility token offerings in the United States, and those are critical distinctions. It’s also frustrating dealing with governments often because they are reactive and not keeping up.”

The panel also discussed other use cases for tokens that exist in the ecosystem that have not been seen before. Trevor Koverko, of Polymath, forecast the next evolution will involve moving from paper to digital, and then to smart contracts, where programs and simple tasks as filing will be automated. Cutler also expects that security tokens will be disruptive in Venture Capital industries.

Sandra Wu, of Origin X Capital, pointed out that with Security Token Offerings (STO) there will be regulators which may only allow accredited investors, which, in turn, may defeat the purpose of a decentralized feature of the technology because it may only be about “the big boys club” again. She asked, “How do we ensure that there will be more individuals coming in and playing in this space? Because ultimately, with this type of technology, you want mass use adoption and therefore, a lot of investors coming in.”

Wu closed the panel stating the future of crypto is looking bright. She hopes to see new custody offerings and new regulations that will guide the community to a new path.

See also Day 2 and Day 3.