27th June 2024 > > Japan.

tl;dr

Japanese institutional investors are queuing up to get involved, once the regulatory landscape improves.

Market Snap

Market Wrap

The German government is selling again through centralised cryptocurrency exchanges – this time Coinbase and Kraken.

In a normal, and a fair world, the civil servant making this decision would be forced to justify why he is deliberately lowering the cash receipts from these sales – cash that rightly belongs to taxpayers – compared to selling privately to an OTC desk. If he could not do so, he should make good the difference using his own assets, particularly his overgenerous pension fund, his excessively large house, the offshore trust, and the fleet of cars, all garnered at taxpayers’ expense.

His colleagues might want to chip in too, for moral reasons.

Curious Cryptos’ Commentary – Japan

Nomura, and its digital asset arm Laser Digital, have released the results of a survey of Japanese institutional investors:

https://laserdigital.com/wp-content/uploads/2024/06/Japan-Market-Survey-On-Digital-Asset-investment-Trends-2024-1.pdf

The survey covered 547 investment managers with more than AUM of Yen 10tn, approximately $60bn. The headline numbers make for interesting reading, shining a spotlight on the pent-up demand for crypto products:

1)      62% see crypto assets as a diversification opportunity (the Holy Grail for investors).

2)      54% are “likely to invest” in the next three years.

3)      66% have a preferred allocation of 2-5% (I love being proved right).

The question then is a simple one. Why not invest now?

It seems there is a myriad of barriers to adoption including a bunch of “Regulatory Bottlenecks”:

1)      Laws and regulations.

2)      Tax.

3)      Treatment of crypto assets under Capital Adequacy Rules.

4)      Other regulatory concerns.

Regulatory clarity is key to institutional adoption of cryptos.

…

Rather pleasingly, only 4.8% of respondents referred to ESG considerations, a small enough number that they don’t even warrant inclusion in the above graphic.

I have long been convinced that the whole concept of the ESG investing philosophy is fundamentally flawed, designed solely to make some people feel better about themselves, whilst actually making the planet a worse place. At best, in the short-term, ESG will ensure your investments underperform, but its effects are more pernicious and more pervasive than that.

It seems that my point of view is at last gaining traction, at least in Japan.

…

An interesting side conclusion of this report is that an increased level of knowledge about cryptos is negatively correlated to an investment manager’s fears around cryptos, and positively correlated to their desire to invest in cryptos.

A conclusion which makes the CCC research team proud of their work.