Stephen Deane CFA and Oliver Fines CFA talked to practitioners, academics and users in the crypto space to put together the report which you can read in full via this link Cryptoassets: Beyond the Hype.
They advise the two main engaged camps i.e. policy makers and investors, as follows. To the former, the advice is keep the space tech-neutral, don’t prioritize incumbents and don’t compromise the integrity of markets.
To investors, it’s do your homework and don’t give into the false imperatives of novelty, hype or speculation. Which is the same as for existing activities anyhow.
They further drill into three specific areas; valuation, fiduciary obligation and custody, as follows:
Valuation. Absent cash flow or any reliable sense of future value investors are urged to take an ‘analysis of use’ approach. Over the course of compiling the report ‘use’, and values, deteriorated (Q.E.D.).
Fiduciary. With reference to the CFA Institute and certain government regulatory guidelines they note managers are under no obligation to engage with novelty; because a ‘thing’ exists is no reason to acquire a position.
Safe Custody. The report was largely written before the FTX collapse but the authors reference it as a good example of how unstable the custody environment is. This will have to be fixed if more progress is to be made.
The work highlights a conundrum.
Without more oversight, centralization, regulation and standardization the development of these assets appears to be roadblocked.
Boosters though have touted the absence of oversight, centralization, regulation and the proliferation of novel approaches as defining characteristics of the advantages of this sector. Tricky.
My parting shot would be good luck to everybody involved and may the discussion and industry development continue. Innovation and new-anything is/are always welcome; so long as participation remains voluntary.
Happy Sunday.