By Mark DeCambre
The Morgan Stanley /zigman2/quotes/209104354/composite MS +1.34% list consists almost exclusively of midcap financial institutions that fall well below top tier institutions such as, its own bank, as well as rivals JPMorgan Chase /zigman2/quotes/205971034/composite JPM +0.89% and Goldman Sachs Group /zigman2/quotes/209237603/composite GS +1.75% , which all offer varying degrees of crypto and blockchain services to individual or institutional investors, or both.
However, Morgan Stanley says its list reflects institutions that have been “the most proactive in the cryptocurrency ecosystem.”
Morgan Stanley acknowledges that the list may be subjective, noting that it plans on altering the composition of the list over time.
As it stands, it includes Signature Bank /zigman2/quotes/204403715/composite SBNY +1.55% , New York Community /zigman2/quotes/207630974/composite NYCB +0.34% , Customers Bancorp Inc . /zigman2/quotes/200155853/composite CUBI +1.14% , Silvergate Capital Corp. /zigman2/quotes/214908078/composite SI +3.05% , National Bank Holdings Corp . /zigman2/quotes/205659047/composite NBHC -0.79% , Metropolitan Bank Holding Corp. /zigman2/quotes/202377047/composite MCB +0.44% , Triumph Bancorp. /zigman2/quotes/201009070/composite TBK +2.21% , Blue Ridge Bankshares Inc. /zigman2/quotes/204992386/composite BRBS +1.56% , and Provident Bankcorp Inc. /zigman2/quotes/204154276/composite PVBC +2.41% .
Morgan Stanley writes that crypto banks have significantly outperformed some bigger peers.
Many of the midcap crypto names are enjoying triple-digit, year-to-date returns, which handily outperform Bank of America, up 53% YTD, Morgan Stanley, up 49%, and JPMorgan Chase, up over 31% (see attached chart showing some comparative returns thus far in 2021).
Tether, Bitfinex fines
The Commodity Futures Trading Commission settled charges with Tether Holdings Ltd. for misleading customers about the quality of the reserves that back its stablecoin, Tether /zigman2/quotes/226258617/realtime USDTUSD +0.0100% MarketWatch’s Chris Matthews writes. The regulator also fined crypto exchange Bitfinex, which is linked to Tether Holdings, for operating as an unregistered futures commission merchant.
The CFTC said in a press release that Tether misrepresented the stablecoin when it claimed that the token was “100% backed by” fiat currency assets.
“Instead of holding all USDT token reserves in U.S. dollars as represented, Tether relied upon unregulated entities and certain third parties to hold funds comprising the reserves; commingled reserve funds with Bitfinex’s operational and customer funds; and held reserves in non-fiat financial products,” the CFTC said.
Tether’s stablecoin, which carries the same name, is a popular asset in crypto because its price is intended to be “stable” and pegged to a fiat asset like the U.S. dollar. Tether is seen as a way for investors to stay in crypto without the volatility associated with bitcoin and Ether.
Tether’s CFTC settlement comes about eight months after the New York attorney general’s office completed a two-year probe into Tether and Bitfinex. That office also concluded that the companies made several public misrepresentations, regarding the dollar reserves backing for Tether in 2017 and a situation in 2018 when Bitfinex lost access to about $850 million of its customers’ funds that it had placed with an outside company.
The move comes after China in the summer cracked down on mining and trading in crypto, sparking a mass exodus out of Beijing.
A crypto sheriff?
Coinbase Global Inc. /zigman2/quotes/225893452/composite COIN +4.34% has proposed a comprehensive change to U.S. federal regulation of digital assets, and is urging Congress to create a new agency to regulate the industry under a different framework than is used to oversee the legacy financial services industry.
“There should be one federal regulator designated for digital asset markets,” Faryar Shirzad, chief policy officer at Coinbase told reporters on Thursday.
Crypto companies, funds
In crypto-related company news, shares of Coinbase rallied 7.93% on Friday to $280.61, and climbed 13.1% for the week.
Michael Saylor’s MicroStrategy Inc. /zigman2/quotes/202561856/composite MSTR +6.10% rose 3.6% to $749.85, contributing to a 5.8% weekly advance. Mining firm Riot Blockchain Inc. shares /zigman2/quotes/209538617/composite RIOT +9.29% rallied 6.6% to $27.85 on the session and rose 7.8% on the week, and shares of Marathon Digital Holdings Inc. /zigman2/quotes/205886758/composite MARA +11.02% jumped 12.2% to $48.89 for a weekly gain of 23.8%. Another miner Ebang International Holdings Inc. Cl A shares /zigman2/quotes/219243771/composite EBON -1.07% increased 7.7% to $1.97 and increased 9.4% for the week.
Overstock.com Inc. /zigman2/quotes/200022359/composite OSTK +9.76% increased 1.6% to $77.67, but fell 0.8% for the week, while Square Inc. /zigman2/quotes/205989440/composite SQ +4.49% picked up 0.6% to $249, with a weekly gain of 4.4%, and Tesla Inc. shares /zigman2/quotes/203558040/composite TSLA +2.08% rose 3% to $843.03 on Friday, helping the Elon Musk-run company post a 7.3% weekly rise.
PayPal Holdings Inc. /zigman2/quotes/208054269/composite PYPL +3.42% added 0.7% to $268.35, logging a 3.2% weekly gain, and NVIDIA Corp. /zigman2/quotes/200467500/composite NVDA +4.08% climbed 0.5% to $218.62, contributing to a 5% weekly climb. Advanced Micro Devices Inc. /zigman2/quotes/208144392/composite AMD +2.57% inched up 0.1% to $112.12 and notched a 6.7% weekly return.
In the fund space, the Bitwise Crypto Industry Innovators ETF /zigman2/quotes/226726487/composite BITQ +5.07% , which is focused on pure-play crypto companies, rallied 4.2% to $25.10 and climbed 4.6% on the week. Blockchain-focused Amplify Transformational Data Sharing ETF /zigman2/quotes/204122720/composite BLOK +3.36% gained 3.6% to $50.86 and rose 5.4% on the week. Grayscale Bitcoin Trust /zigman2/quotes/203330852/composite GBTC +6.74% , which tracks the Bitcoin market price, increased 5.6% to $47.41 and booked a 12% weekly return.
New funds, the Invesco Alerian Galaxy Crypto Economy ETF /zigman2/quotes/230087819/composite SATO +5.06% rose 5.3% on the week and 4.3% on Friday and Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF /zigman2/quotes/230087835/composite BLKC +3.63% posted a weekly return of 4.4% after rising 3.3% to end the week.
China Has Good Reason to Fear Bitcoin (Barron’s)