Caitlin long morgan stanley bitcoin

May was a dizzying month for cryptocurrency investors, and not just because of the headline-grabbing but not unprecedented price movement on major assets like Bitcoin. Since May 5, regulators from Washington to Beijing have issued a near-daily stream of announcements aimed at taming cryptocurrency markets. The Justice Department and the IRS have launched multiple investigations into potential use of cryptocurrency exchanges to evade taxes and launder money. And the Federal Deposit Insurance Corporation and the Federal Reserve are making multiple moves toward potentially standing up regulatory guideposts for digital asset banking.

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Content:

• Wyoming Laws Regulating Blockchain Businesses
• Re: Staff Letter: Engaging on Fund Innovation and Cryptocurrency-related Holdings
• With Banks Turning to Bitcoin, Is It Finally Time to Long the Bankers?
• 21 Bitcoiners to Follow in 2021
• PODCAST: Caitlin Long on Bitcoin as Insurance Against Financial Collapse
• Bringing Blockchain to the Cowboy State
• Caitlin Long on Bitcoin, Repo Fiasco, Blockchain And Rehypothecation (#GotBitcoin?)

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Wyoming Laws Regulating Blockchain Businesses

Caitlin Long of Avanti Financial Group joins me to talk about Bitcoin, banking, rehypothecation and what Austrian Economists are missing. How much additional money is being created in the shadow banking system?

Well, it does relate to the financial crisis actually. And that really got me going on a deep dive ultimately found the Austrian school, but I did a lot of reading of all the various schools of economic thought, modern monetary theory before it became hip. Because I knew it was at the opposite end of the spectrum. And I like to point to one of the contradictions that really got me going was when treasury secretary Geithner made a comment on Charlie Roses show that interest rates were too low going into the financial crisis.

And that was definitely a cause of the financial crisis. And then not even, you know, a week later or so he was interviewed arguing that the fed should cut interest rates.

So that logical inconsistency to me made me realize there was more to the story and sure enough. And then you got into all this. It used to be all done physically.

And so it made sense to net transactions. So all the buys and sells of your IBM stock were netted within your broker and then your broker netted against other brokers. And so you just reduce the amount of transactions that needed to be processed. But what it also did was essentially copy the centralized structure of the banking system. And it does much of the same thing. Now, probably in the last, certainly 15 years, the technological constraints that made it make sense for those systems to evolve that way no longer have been constraints.

And the answer is there are a lot of people who have an incentive not to fix things. And I want to touch a little bit on the payment latency part, or I guess, settlement latency as well, because I was reading one of your recent papers. It was actually an IMF paper. And you touch on this idea around contrasting between RTGS real time gross settlements, I believe versus say delayed settlements.

Could you elaborate a little bit on the differences there? Manmohan Singh not the same name as well, same name as the Indian prime minister of a different person. Singh is a career staff economist at the IMF. So long before digital assets, it became, you know, on the radar screens of the mainstream. He and I were, I was reading his work and we finally connected several years ago. Co-Publish on that, what an honor. Right, when you trading a baseball card, you both hold onto the baseball card and you let go at the same time.

That the buy settles at the same time as the sell, and the problem is the adults screwed it up. And so what happens is each intermediary has to setle in sequence. And until probably 10 years ago, maybe even as recently, in some cases, as five years ago, the payments were still batched. And so, you know, and settled after business hours. So you just really had inherently a sequential settlement process.

And when we get there, frankly, there are enormous efficiencies that will be unleashed. And that is what I think is one of the big, powerful aspects of Bitcoin and blockchain technology is just the efficiencies that will be unleashed in allowing for real time gross settlement of payments. And those two things are very, very different. We might naively think, well, okay, the bank has X number of dollars on reserve.

Could you outline a little bit around how that rehypothecation occurs? They control a lot more flow than you know, the hedge fund managers who are interviewed on CNBC, for example, but because they work for businesses, you just never see them on CNBC, but they definitely understand this.

Deposit Insurance is really meant to protect individual depositors not you know, significant businesses. And therefore you have to do the work on understanding the counterparty credit risk of your bank. But I think the nature of your question is more for the securities industry. And I can share examples of the impact to you from that. But I, you know, candidly, I think this is one of those things that if the SEC were truly a hearing to its consumer protection mandate, it would be all over this because that is not a consumer friendly way to handle this.

And I went looked at the Supreme Court case and sure enough, and that was a case of somebody rehypothecating an industrial diamond where he, he had pledged it as collateral for a loan and then turn around and pledged the same diamond as collateral for a separate loan, without telling the second, without telling either bank.

Whereas in that case, there was no consent. But the problem is that, does anybody really understand what that means?

I think the vast majority of people do not. And without it, the structure of the securities industry would be very different than it is today because the profit potential would be very different than it is today. And so if you want to own your own securities, get the paper stock certificate, but good luck getting it because the SEC has done such a big job trying to get it all electronified and put in these centralized structures that your broker will, will not probably give you your paper stock certificate if you ask for it.

And they need somebody to be able to lend it to them in a short period of time, that kind of aspect? The biggest one is this is the way the broker dealers finance themselves.

And even the ETF world. And you just put those up. These are typically one day loans. So typically they mature overnight. And then then the next morning you just take out the loan again. But in the last as I left the securities industry, there was a lot more, and that was in There was a lot more term repo happening now where where you were actually having a match on the financing, the secured financing, instead of it being overnight, it would be seven day or sometimes it would be multi year.

It lost its overnight financing as soon. And as soon as it was out of the overnight financing market, it was done. So these, these games only work as long as the banks can continue to fund themselves. And it might also be fair to point out that were it not for some of these systems, the costs actually might be higher to the consumer. They might be paying a higher fee to use an ETF service or something like that.

Because part of how that ETF service is making its cut is say, taking advantage of that time difference right? And think the rise of passive investing, you know the index funds had a lot to do with that. Well, your asset manager has costs. So how is it that they have a no fee fund? Where are they making their money? And so as fee competition increased, especially with the rise of passive investing.

This is what happened. This is the only way they make money. I mean, you have ETFs that actually trade much greater volume than the underlying. I think this has become a challenge. The banks in Europe are much more dominant than the bond market. And in the US we went with securities market.

The bond market, you know, became dominant relative to the banks. And you pretty much knew what therefore what the inflation rate was going to be. Now we actually see the opposite. And a lot of that has to do with the very different mechanism of credit creation that happened in the securities market.

I would say going, it really goes back to , which was during the Volcker Fed, you know, the Austrians tend to, of all the Fed governors like him, the best of all the fed governors in recent years because he actually did shrink the money supply raise interest rates, you know, try to actually put a halt on this on the unconstrained growth of money and credit. And he did succeed a little bit, but I actually think he made an enormous mistake.

And it was in , which was when, instead of the Fed targeting the money supply, they decided to start targeting the price of borrowing money. You can target one, but not both. You can either manage the supply, which is what they did in the seventies off going, after going off the gold standard in 71, or you can manage the price of money and let the supply float when they were managing the supply, the price floated.

But in particular in , when the Volcker Fed allowed this switch, they never announced it. It was, you had to go through the minutes of the FOMC meetings to find when they announced it. But what that did was hand over the keys, the proverbial keys to the kingdom, to the financial industry, to try to determine what the supply of money should be.

If the Fed was only managing the price, then the supply was the floating variable and the securities industry figured out a way to really increase the supply of money and credit through the shadow banking system without impacting the fed funds rate. And I think that was a colossal mistake. And as history as time goes on economists, I think will look back on that and, and realize that was as, almost as meaningful as as letting go of the gold standard in the postwar period. And then letting go of the gold exchange standard in , letting go of the of the money supply targeting standard in was also a very important inflection point in US monetary history.

That just, that means the banks can lend out all this additional money. And I think also Jeffrey Snider has been very vocal on this topic as well, talking about the Eurodollar system. Well, the privately created money comes from the private financial sector.

So as we know that the Fed controls the monetary base and then the banking and securities industries create credit on top of that.

One thing is you and I were chatting before we started the podcast that I think the Austrians would not have misunderstood this as much had Murray Rothbard still been alive, because I think he would have written a sequel to the mystery of banking, which is the mystery of shadow banking.

And it basically created the illusion of some free lunch. And a lot of the reason for that was the rise of the Euro dollar market.

Re: Staff Letter: Engaging on Fund Innovation and Cryptocurrency-related Holdings

Wyoming has a welcoming approach to digital assets and cryptocurrency. Avanti is intended to serve as a connector between the traditional US payments system and the world of digital assets. Founded in , it gained a banking charter from the state of Wyoming that same year. It is only the second-ever crypto company to land status as a bank in the US, after Kraken Financial. Avanti also plans the launch of its own tokenised, programmable US dollar, and on-ramp services for bitcoin and other cryptocurrencies. These new institutions are effectively banks able to receive deposits and conduct asset management, but not lend to customers. Related: Non-fungible tokens: how do you regulate a non-conventional marketplace?

With Banks Turning to Bitcoin, Is It Finally Time to Long the Bankers?

Expert insights, analysis and smart data help you cut through the noise to spot trends, risks and opportunities. Sign in. Accessibility help Skip to navigation Skip to content Skip to footer. Join over , Finance professionals who already subscribe to the FT. Choose your subscription. Trial Try full digital access and see why over 1 million readers subscribe to the FT. For 4 weeks receive unlimited Premium digital access to the FT's trusted, award-winning business news.

21 Bitcoiners to Follow in 2021

Caitlin Long is chairman and president of Symbiont, the market-leading smart contracts platform for institutional uses of distributed ledger technology. Caitlin previously spent 22 years on Wall Street in senior roles, working for Morgan Stanley , Credit Suisse and Salomon Brothers During her career she startedand ran three new businesses, was a top-ranked equity research analyst for the life insurance sector, and worked directly for the co-CEOs on a business restructuring in Zurich. MarketsMedia awarded Caitlin its Women in Finance Award for Excellence in Blockchain, and Institutional Investor named Caitlin to its list of the most influential people in pensions during her final 3 years on Wall Street.

PODCAST: Caitlin Long on Bitcoin as Insurance Against Financial Collapse

Wyoming Blockchain Bills. Utility Tokens. The First Crypto Bank. The Future of Wyoming Blockchain Laws. By Cryptopedia Staff. With close collaboration between lawmakers and industry experts, Wyoming has enacted multiple crypto bills that seek to clarify the existing regulatory environment surrounding cryptocurrency businesses.

Bringing Blockchain to the Cowboy State

As well as founding the nonprofit organization Blockchain Commons , he previously served as a principal architect at the infrastructure provider Blockstream. He is joined by Katie Cox, who has over 30 years of bank regulatory experience. She spent 10 years on the board of governors at the Federal Reserve, overseeing its mergers and acquisitions section. She ranked No. A veteran of the Wall Street pension solutions business, which she ran at Morgan Stanley for nine years. Bitcoin Core developer Bryan Bishop was appointed as chief technology officer, with Wyoming banking executive Britney Reddy becoming chief financial officer. In June , Avanti announced it had closed its angel round of funding, enabling the company to continue with the process of applying for a bank charter. Connor Sephton is a journalist with an interest in cryptocurrencies, personal finance, and financial inclusion—as well as the challenges the crypto industry faces in achieving mainstream adoption.

Caitlin Long on Bitcoin, Repo Fiasco, Blockchain And Rehypothecation (#GotBitcoin?)

Not only is her investment in BTC a significant move towards normalising cryptocurrency purchases, but she is actively working to bring a fair legislative agenda around crypto. Senator Lummis recognises the dangers of embarking upon irresponsible debt management, including the dollar's devaluation. Meltem Demirors is a prominent investor, cryptocurrency proponent and investment strategist based in the US. She currently serves as chief strategy officer at CoinShares, a crypto asset manager focusing on developing private funds and investment vehicles to provide institutional investors with thematic, risk-managed exposure to the emerging crypto asset ecosystem.

The nine-page white paper makes no mention of "hard money" or Austrian economics or the Federal Reserve or bailouts or anything like that. It talks instead about how it would solve the ecommerce problem of needing to have "non-reversible payments. And the white paper's original publication date of October just weeks after the financial crisis climaxed with the Fed's bailout of AIG--speaks for itself to the crypto community. Crypto has become so successful that it is, in many ways, the new macro.

In this conversation, we discuss the macro economy, bank balance sheets, monetary stimulus, inflation, impact of the OCC decision, an update on Avanti, and the potential effect on Bitcoin and banks from the Presidential election. Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account.

Caitlin Long is peeling back the cover on a chronically ill financial system, highlighting why its vulnerabilities are crippling the markets. In a recent tweetstorm, Long says artificially low interest rates have triggered a cascade of bad business decisions that lay the groundwork for major upset. Each time, though, there was enough balance sheet capacity to reinflate the system by pumping more debt into it. Important to understand that when debt expands, liquidity grows — and mostly it just pushes up financial asset prices for various reasons.