Bitcoin on central bank balance sheet? Yes, predicts Gemini’s Winklevoss

Dubai - Winklevoss had predicted in 2015 that Bitcoin market cap will reach $1 trillion, which came to pass in 2021.

Cameron Winklevoss and Tyler Winklevoss. – AP
Cameron Winklevoss and Tyler Winklevoss. – AP

Sandhya D'Mello

Published: Sun 2 May 2021, 10:54 PM

Last updated: Mon 3 May 2021, 2:58 PM

A central bank will have Bitcoin on its balance sheet, because they have gold on their balance sheet, said bitcoin advocate Tyler Winklevoss, cofounder of Gemini, in a recently held AIM Summit webinar on Converging Crypto and Capital markets.

Winklevoss had predicted in 2015 that Bitcoin market cap will reach $1 trillion, which came to pass in 2021. “At some point, a central bank will have Bitcoin on its balance sheet, that just will happen because central banks have gold on their balance sheet. And Bitcoin is gold to point out,” said Winklevoss.

Frederick Pye, chairman and CEO of 3iQ.
Frederick Pye, chairman and CEO of 3iQ.

“I do think you have a world where every company, private public companies are putting Bitcoin on their balance sheet. You’ve got sovereign wealth, endowments, central banks as well, because it’s just, they’ve already been doing this with gold, and everybody recognises that Bitcoin is a better version of gold.”

The famous Winklevoss twins — Cameron Winklevoss and Tyler Winklevoss — you may recall are known for their legal battle with Facebook, founder Mark Zuckerberg, but that is past. The Winklevoss twins have penned a complete new journey and easing the path for investors of digital assets.

The AIM Summit webinar on Converging crypto and capital markets also hosted Frederick Pye, chairman and CEO of 3iQ and Zachary Cefaratti CEO of Dalma Capital.

Zachary Cefaratti, CEO of Dalma Capital.
Zachary Cefaratti, CEO of Dalma Capital.

“Our advice for Cryptocurrency investors in the Middle East would be start with a liquid and regulated investment that can be tracked in the context of a regular portfolio. Embrace bitcoin as either a long term technology play, a potential future store of wealth or a portfolio diversifier. Bitcoin is the technology platform of the new digital world,” said Pye.

Canadian digital asset management firm 3iQ received regulatory clearance for a dual listing of the Bitcoin Fund (QBTCu.TO) on Nasdaq Dubai, making it the Middle East’s first indexed cryptocurrency digital asset-based fund.

The Bitcoin Fund, which was listed on the Toronto Stock Exchange last year, has roughly $1.5 billion in assets under management and plans to manage double that next year, Frederick Pye, chairman and CEO of 3iQ, told Reuters in an interview.

“The idea is bitcoin trades 24 hours a day ... so our interest is to bring a regulated product to the Dubai market in their time hours,” Pye said.

The shares are expected to start trading on Nasdaq Dubai in the second quarter. Pye said 3iQ is already in talks with exchanges in Singapore, Taiwan, Sweden and the United States to list the Bitcoin Fund in those markets, eventually aiming for cryptocurrency trading around the clock.

Dalma Capital, a Dubai-based alternative investment firm, was 3iQ’s syndicate manager for the fund’s Middle East expansion. Corporate finance advisor 01 Capital and investment firm Razlin Capital, both London-based, advised on the listing and Pinsent Masons was legal counsel for the listing process.

“We believe that this is the opportune moment to expand this unique investment opportunity into the Middle East region,” said Pye.

Institutional investors including sovereign wealth funds have expressed interest in the listing, said Cefaratti.

“There’s just been a lot of grassroots demand for it. Historically, investors who tried to invest in bitcoin through their regional banks ... in a lot of cases, if the banks found out they were sending money to cryptocurrency exchanges, they would actually close their accounts. So this is a huge shift and a huge change,” Cefaratti said.

Meanwhile, latest edition of PwC Global CBDC Index 2021 brings out ongoing transformation triggered by Central Bank Digital Currencies (CBDCs) globally.The PwC Global CBDC Index is designed to measure a central bank’s level of maturity in deploying their own digital currency.

It provides a synthetic index, capturing the central banks’ progress, stance on CBDC development and public interest in two distinct use cases: Retail CBDC which are held directly by citizens and corporates; and Interbank, or Wholesale CBDC which are restricted to Financial Institutions, principally for interbank payments and financial settlement processes.

“We believe CBDCs will contribute significantly to the modernisation of the international monetary landscape, hand-in-hand with reconfiguration in both payment and financial infrastructure. They will generate numerous opportunities for further digitisation in both corporates and financial institutions, as their integration in payment and financial infrastructure progresses. Seizing these exciting opportunities will require operational, legal and regulatory process upgrades as well as an alignment of accounting and internal control measures,” said the report.

“The evolution of CBDCs could allow deposit holders to keep their savings directly with the central bank, which would pose a significant threat to the commercial banking model given the potential disintermediation of banks in holding (and lending) savings. Given the important role of commercial banks in money creation through the fractional reserve banking system, CBDCs will likely come with ‘forced intermediation’ – requiring CBDC holders to nominate an authorised member bank to ‘hold’ their CBDCs on their behalf and continuing to maintain exclusivity for commercial banks to hold deposits directly with the central bank, thus allowing commercial banks to continue to make fractional reserve deposits and lend excess cash. Such enforced intermediation will largely maintain the status quo of the financial system whilst still unlocking many advantages CDBC’s have to current monetary systems, but this will continue to put CBDCs at a disadvantage to truly decentralised cryptocurrencies like bitcoin,” added Cefaratti.

More than 60 Central Banks have been exploring CBDCs since 2014. Progress has been accelerating with some CBDC projects now entering implementation phases. Institutional involvement in CBDC continues to strengthen the ecosystem at large, with public stakeholders such as the Bank for International Settlements, the World Bank, the International Monetary Fund or the World Economic Forum, active on the topic.

More than 88 per cent of CBDC projects, at pilot or production phase, use blockchain as the underlying technology. Whilst a blockchain is not always necessary to create digital tokens, blockchain technology brings several benefits to CBDC developments. —

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