The second half of 2023 “rose for bitcoin”, says the VanEck boss
Custodia founder and CEO Caitlin Long and VanEck CEO Jan Van Eck join Yahoo Finance Live to discuss crypto regulation, scrutiny, insurance and the outlook for the cryptocurrency space.
Video transcription
[AUDIO LOGO]
– Well, with the markets still looking for a thaw in the crypto winter, let’s look at what investors are looking at for 2023. With us now, two Wall Street and crypto veterans, Caitlin Long, founder and CEO of Custodia Bank, and Jan Van Eck , VanEck CEO, and of course Yahoo Finance’s own David Hollerith. A warm welcome to you all. So first I want to start with you Caitlin because a lot of people in particular are seeing this surge that we’ve seen in Bitcoin. But what does the landscape actually look like right now when we go beyond much of the noise in the headlines?
CAITLIN LONG: Well, there is certainly a lot of optimism in emerging markets where adoption is spreading both of Bitcoin itself and the Lightning Network, which is a layer 2 solution for small-value payments that is proliferating at a rate greater than the growth of stablecoins. And what’s interesting about the Lightning network is that any currency in the world can be traded with it, simply by unlocking the amount of Bitcoin to secure it.
And so this is essentially a means by which the emerging markets get access to US dollars without touching the US banking system. There is much reason for optimism there. In the American markets, however, as you have rightly pointed out, regulatory work is underway.
DAVID HOLLERITH: And yes, and that’s a good point. VanEck is a major investor in emerging markets. It also has a Bitcoin price target of $250,000 starting in 2028. So with that, I’d also point out that your outlook for 2023 is that the markets are going to be a little bit sideways, mostly for stocks has generally been what it sounds like you say. So I was curious to think about it in retrospect. Do you expect Bitcoin’s trajectory to follow stocks as we’ve seen in the past? Or what are your expectations for it this year?
JAN VAN ECK: Actually, no is the short answer. And I would say, yes, there is a long-term price target for Bitcoin. And I’m basically deriving that by saying that Bitcoin could achieve half the total market value of gold. Both gold and Bitcoin really trade against the Fed. So when the Fed is super tight like it was last year, times are tough for both assets.
But the reason I’m cautiously optimistic this year for Bitcoin is because at some point the Fed will stop tightening. And we also have the halving, which is expected in May 2024. So I think, at least in the second half of this year, it will look really rosy for Bitcoin. Now, if I may go quickly, we’ve had this spurt in Bitcoin and asset risk earlier this year. And our basic thesis is that it comes from a surprise increase in global money supply that has occurred mainly from Asia in the last couple of months. And I’m happy to talk about it.
– We’ll come back to that in a moment. Caitlin, I wanted to get back to you for a moment, especially with regards to your platform. You are compliant with regulations. You have transactions across digital assets and traditional financial systems. But a lot of people who might be looking to get into crypto, they’re looking for that insurance that they can trust. And so, when you think about the runway or the timeline for having cryptoassets federally insured, what’s the kind of base case that you and the team are thinking about?
CAITLIN LONG: Oh boy, federally insured is not on the table. In fact, it’s actually the opposite. And to be clear, Custodia Bank does not yet take customer deposits. We build. And with the regulatory environment in the United States so fluid, a crackdown involving the White House, the Federal Reserve Board of Governors and the Kansas City Fed all began on Friday, the 27th. January where there was a motion against Custodia Bank to deny our membership application to become a Fed member bank.
After that, the OCC has taken action. Now last week, the IRS and the SEC–there’s more SEC action coming up this week. So the notion that these assets will ever be federally insured is actually quite the opposite. There is a crackdown trying to go after stablecoins, trying to debank the industry and trying to clarify the extent of unregistered securities in the industry.
We’re finally getting clarity, the regulatory clarity that this industry has been begging for really since I’ve been involved, which is more than 10 years now. We are finally getting some clarity from the US regulators. And boy, have there been many activities that have been, shall we say, of questionable legal authority and jurisdiction by the agencies in Washington DC.
DAVID HOLLERITH: Yes. And Caitlin, just to add to that, there’s obviously a number of enforcements that have happened. But if we’re just focusing on Custodia, why do you think the Federal Reserve decided not to let Custodia join as a member bank?
CAITLIN LONG: Well, it spoke publicly about the novel and outstanding activities. And Custodia has proposed to cut these out of the business plan. Again, everyone is trying to figure out where the line is drawn here. And is the goal of the Biden administration — again, this is led by the White House. Is the goal of the Biden administration to stifle all crypto across the board, or is this really just about stablecoins and unregistered securities?
And Custodia Bank, I think was–well, we were the first to be targeted in this wave. It is now clear that the wave is quite wide and quite deep. But the interesting question is, if you look at the wave that has taken place, there is a de-banking of the industry. It cuts off stablecoins– fiat-backed stablecoins. And there is also the preparation of unregistered securities. Custodia fit into the first two buckets – a bank serving the industry, it suggested in our business plan, as well as issuing a US dollar stablecoin-like instrument called Avit.
We have cut it out of our business plan. And then potentially they shot the colt to disperse the herd so to speak as we would say in Wyoming, partly because we actually fit into two of those buckets. The real question for the industry at this point becomes, how far is this debanking wave? Is the goal of the Biden administration to completely debank the industry, in which case move the whole thing offshore?
But because, of course, this is internet-based money, it won’t go away. And people will still use it. Or is the goal really just to go after stablecoins and unregistered securities? If it’s the latter, then as the shakeout takes place, it will be, I think, phoenixes rising from the ashes so to speak.
– And so, Jan, for retail investors who really saw some big losses here, we also continue to see institutional investors perhaps still taking a different path as we see retail investors pull back. What is the end game here do you think for some of these institutional investors as they look at the path forward right now?
JAN VAN ECK: I think institutional investors, frankly, are still licking their wounds after last year and may open their eyes to crypto, but not do anything meaningful this year. And I don’t think even retail investors have gotten that involved either so far. I’m thinking that– why are we here?
Crypto has the ability to cut the cost of the financial system by maybe 90% for the consumer, and as Caitlin talked about, it gives a lot of people who need access to a stable unit of value like the US dollar access to it if you have a cell phone. And so there is a lot of good that can bring to users all over the world through crypto. But boy, the regulators are really shooting a lot – shooting a lot of horses, to use Caitlin’s analogy, recently here in the US.
What does that mean? I will add another observation, which is not just moving activity offshore, which is why FTX was in the Bahamas in the first place. But it also pushes a movement toward decentralization away from the kinds of entities like centralized exchanges that have just now gained large market shares. So it’s really moving more towards a decentralized basis, more peer to peer, more wallets that the government can control even less.
– Thank you both so much for joining us this morning– Caitlin Long, Founder and CEO of Custodia Bank, and Jan Van Eck, VanEck CEO. Thanks so much. We appreciate the conversation and the time.
