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14th June 2023 > > Hinman.


tl;dr

The Hinman documents do not live up to the hype, but capital raising ventures using blockchain technology certainly does.


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I must admit I got caught up in the hype around XRP (see below) firmly believing that today would be a new dawn for the crypto world.


You see, I am not always right.


Curious Cryptos’ Commentary – Hinman documents

Well that was a waste of everyone’s time.


Don’t believe me? Look at XRP’s price action. On release of the near-legendary Hinman documents there was a minor rally of 6% or so, and now we are below where we started yesterday.


I have the so-called cache of emails if you wish to read them, but I seriously suggest you don’t. There is no insight to be gained from wasting energy on these documents.


I find it extraordinary that so much legal time and money has been spent on this issue. Perhaps I am missing something of nuance, but I fail to understand what all the fuss has been about. Not everyone agrees with me, as usual. Ripple CEO Brad Garlinghouse tweeted beforehand:


“Wish I could go in depth now, but we've waited this long (18+ months), I don't want to overstep… suffice it to say @s_alderoty and I believe they were well worth the wait.”


Who are you trying to kid, matey boy?


Curious Cryptos’ Commentary – Crypto adoption

With all the recent regulatory action, and the Hinman documents situation, the CCC has been too focused on these types of issues of late. Let’s get back to the real world.


Two days ago the investment banking arm of Bank of China issued $28mm of structured notes using the Ethereum blockchain.


Structured notes are a little-known element of the investment world. They tend to come in small sizes like this and are often targeted at a small number of institutional investors looking for specific exposure. Hence the name – they are a bespoke response to particular investment needs. Almost invariably, there is a derivative element bolted on top of a more traditional looking bond issuance. My very first trading job was buying and selling structured notes, probably the most illiquid instrument in the whole of the capital markets world, which is good grounding for any corporate bond trader.


The press release is here:



There are several interesting parts to this story.


These notes have been issued under Hong Kong and Swiss law, meaning that the Hong Kong authorities (and therefore the rulers of China) are supportive of this initiative.


Ms. Ying Wang, Deputy CEO at BOCI said:


“BOCI is very pleased to be at the forefront of innovation in technology finance and digital finance. Working together with UBS, we are driving the simplification of digital asset markets and products, for customers in Asia Pacific through the development of blockchain-based digital structured products, designed specifically for customers in Asia Pacific. We are encouraged by the evolution of Hong Kong's digital economy and are committed to promoting the digital transformation and innovative development of Hong Kong's financial industry.”


This is a further expansion of UBS’s drive to build blockchain products for clients, as explained by Aurelian Troendle, Global Head of MTN Trading at UBS:


“We are pleased to work with BOCI on this transaction to bring structured products onto a public blockchain network, supporting our APAC clients’ increasing interest in fully regulated digital asset products. High-frequency issuance activity can benefit from vast efficiency gains through the use of blockchain technology, which will ultimately bring advantages to investors.”


And this gets to the very heart of crypto adoption for the financial sector.


Efficiency gains by removing settlement issues and reconciliation issues for the middle and back office will transform the economics of the capital raising process for issuers, bankers, and end investors. The cost of capital in restricting wealth creation is overlooked by almost all politicians and all the press. Indeed both of those parties seem intent on driving up the cost of capital through regulation and taxes at every available opportunity.


Blockchain technology will help to resolve these self-inflicted problems.

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