Don Lawsky graced the plebes with a press conference last night and announced the final version of the long awaited Bitlicense. The final draft is same same but different. The core requirements remain the same. Some of the more ridiculous provisions were struck. The initial reaction by many was that the revised version is a necessary evil and slightly better than expected.
Those expecting a blockbuster announcement of a major financial institution that now will be accepting or trading Bitcoin were disappointed. Bitcoiners need to realise that large financial institutions do not care about regulations. If it was profitable to trade and accept Bitcoin, they would already be doing it.
Monetary historians will remember how and why the Eurodollar market originated in London. Since FDR’s ascension to power in the 1930’s, America has been a centrally planned and controlled economy. The free market exists in very few arenas. Banking swung from a free for all, to a collection of heavily regulated legacy banks. There were interest rate ceilings and severe restrictions on the issuance of commercial paper and foreign exchange trading. American banks (who loved the regulations so much) decided to issue dollar denominated debt without restrictions from London. The Eurodollar market arose in the 1950’s to escape onerous US regulations. Morgan Stanley was one of the most active players in the new space.
U.S.-dollar denominated deposits at foreign banks or foreign branches of American banks. By locating outside of the United States, eurodollars escape regulation by the Federal Reserve Board.
Everyone else followed and the global liquidity centre for FX and derivatives became London. To this day London regulations on derivatives of all sorts are much lighter than American ones. Remember the “London Whale”? He was the trader responsible for JPM $6 billion dollar loss on exotic credit derivatives a few years back. His whole team sat out of London, far away from the prying eyes of the coterie of ineffective paid-off American regulators. Most large financial institutions book and house derivatives on London banking chains.
The Bitcoin community needs to wake up. Large financial institutions will get involved in Bitcoin when there is enough money in it for them. Hopefully that happens soon. Regulations are only meant to extract rent from certain industries, and trick a gullible public that their over paid government overloads actually care about their well being.
The lack of a price pop after the Bitlicense announcement is worrying. Expect the downtrend to continue, and a retest of $220. Sell XBUM15 with a downside target price of $220. If $220 breaks, look to cover at $213.