This week, British regulators struck out at the exchange Binance and said it couldn’t operate in the UK anymore.  It was a body blow to Binance, but it won’t be fatal.  The initial trouble was figuring out how to get your money out of Binance if you were a UK investor.

Then, Deutsche-Borse said they partnered with British based TP ICAP to offer crypto derivatives trading.  Germany issued a license to Coinbase for custody the day before.

But, what I focused on was banks finally adopting blockchain technology to trade bonds.  Not Treasury bonds.  Treasury bond markets worldwide are very efficient and one of the main reasons for that is the existence of liquid futures markets.  If you have ever traded cash bond markets in corporates or munis, you know how inefficient they are.  Bid/ask spreads are wide and dealers have their own private books.  It is a license to steal.

For what it is worth, I have worked on starting a futures market for corporate bonds or muni bonds and it is impossible.  The theory works, but the practice doesn’t.  Ironically, at the University of Chicago one of the jokes is, “It works in practice but does it work in theory?” 

What I want to focus on though, is the startup crypto world and bonds.  I have seen quite a few deals in many permutations where entrepreneurs have the idea that they can tokenize a corporate bond or muni bond and trade it more efficiently.  It’s a great (Read more...)