Patrick Springer has a long career in the financial markets, having previously worked as an investment specialist helping investors make decisions in global equity markets and latterly becoming managing director at Morgan Stanley.

He also managed three regional equity franchises for Morgan Stanley in New York and leading sales teams in US Equities, Pan-Asian Equities, emerging markets and Japanese Equities.

He believes Wall Street companies will adopt aspects of blockchain if it is an asset their core client want to trade with them – such as Bitcoin futures.

And “if blockchain technology will give them significant cost savings and/or market share opportunities,” he says.

Regulatory issues

The demand for Bitcoin futures and ETFs by core institutional investors has “still not been determined.” This is as a result of the damage from the cryptocurrency meltdown in 2018 plus “plus the numerous regulatory issues will take time for the market to digest”.

Blockchain is inherently disruptive, so the Wall Street majors “will move into blockchain only when new types of competitors, security concerns or new products make the investment attractive,” he says.

While at Morgan Stanley, he spent a lot of time talking to investors and the company’s research team in 2016 and 2017 about where blockchain technology and cryptocurrencies fit in as an investment theme for institutional investment, but says he did not play any roles in the company making decisions about crypto investments.

He became materially involved in the technology last summer when he met Polybird Exchange co-founder and CEO Harish Gupta.

Stable coins

He says: “Despite the crash in cryptocurrency and ICO prices, blockchain-based securities are here to stay. I say that because there is increased confidence in stable coins, and there will be new types of blockchain securities for investors to look at.”

Tokenised assets – meaning digital tokens of real assets – will begin, “creating opportunities in many different types of asset markets.”

Institutional and accredited [investors with at least $1m in net worth] investors will be “attracted to an emerging asset class of tokens that provide ownership interests more easily or provide streams of income in a secure manner.”

He made the ‘leap’ into blockchain as he says: “It’s important for people to challenge themselves at different times of their careers.”

Global economy

He says Polybird excites him as they are “pursuing a market opportunity that many don’t yet understand” and it’s an opportunity that can bring “huge benefits” to investors and to the “efficiency of the global economy itself.”

Blockchain is an “enormous threat to the current system of consumer credit payments and bank transfer fees,” he adds. “Digitising equities and bonds for major corporations will have its place, too.”

There’s also a vast white space market opportunity between the world of public companies listed on leading global exchanges and the small entrepreneurs raising money via nascent crowdfunding networks.

Tokenising assets will reduce friction in the real estate market as titles, licences and other rights are digitised and governed by smart contracts. “Listing them on a global marketplace where more investors can evaluate, value and transact more seamlessly, will lead to better capital allocation and a more efficient economy,” he adds.

Benefit asset markets

The number of companies publicly listed on the US stock exchange has halved in the last 19 years. Although there are many reasons for this, digitising assets can “bring benefits to asset markets that are currently private in nature and have a lot of cost frictions,” he adds.

Polybird is an end-to-end issuance and exchange platform that facilitates the buying and selling of tokenised assets, powered by blockchain.

The regulatory outlook is “indeed very challenging”, he adds given that everyone, including the regulators is in new territory. “But we see the market for digital assets as an opportunity to make asserts more transparent, more tradable and more efficient, which regulators will ultimately appreciate.”

The demand for regulation will continue in 2019 for clarity of offerings and marketplaces that they will support, but it’s difficult to say when that will transpire.

He says a bull market in cryptocurrency “will come again when all the speculators have exited – ie when investors who believe in the greater fool theory of selling the same asset to someone but at a higher price, all leave,” he adds.

Great shakeout

“It will also come again when there is a great shakeout in the number of cryptocurrencies and utility tokens – there is no value to having an unlimited number of digital currencies sprouting from numerous forks.”

It is also important to remember Bitcoin plays “a very important function in countries around the world that are bankrupt or have a deep currency crisis. As bitcoin laps time and makes good on its promise to cap the amount of coins it can print, mainstream investors may take a renewed look at it again.”

Digitised or tokenised asset offerings which are “done in compliance with local regulators will certainly be a key catalyst for mainstream investors to see the value of blockchain securities,” he believes. “I also think that stable coins that can successfully establish themselves as a means of cross-currency payment with ultra-low fees would also be a major catalyst.”

Tokenisation of assets began in 2018 with the offering by Harbor of South Carolina real estate. The tokens, he adds, are available on their website. “When more tokens and issuers come to market, a marketplace will need to develop.”

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.