Offshore Funds

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Offshore Funds

Contributors

Philip Graham
Philip Graham
  • Philip Graham

  • Partner
  • British Virgin Islands
Lewis Chong
Lewis Chong
  • Lewis Chong

  • Partner
  • Vancouver
Ian Gobin
Ian Gobin
  • Ian Gobin

  • Partner
  • Cayman Islands
Marc Parrott
Marc Parrott
  • Marc Parrott

  • Partner
  • Hong Kong
Matthew Blakebrough
Matthew Blakebrough
  • Matthew Blakebrough

  • Associate
  • British Virgin Islands
Marco Martins
Marco Martins
  • Marco Martins

  • Partner
  • Cayman Islands
Vanessa Molloy
Vanessa Molloy
  • Vanessa Molloy

  • Partner
  • Luxembourg
George Weston
George Weston
  • George Weston

  • Counsel
  • British Virgin Islands

Does the latest Bitcoin surge mean the long crypto winter is finally over?

Bitcoin Bull Run, Crypto Spring or just another temporary blip? The debate will continue on whether the latest increase in the value of Bitcoin is indicative of ‘the good times returning’ for crypto assets or just another short lived upturn.

Why the recent increase?

Whatever your view may be, the increase in Bitcoin’s value from April 2019 onwards has been very impressive. The crypto-currency increased in value from around US$4,200 in late March to over US$8,000 in mid-May. This is some way short of the explosive highs of late 2017, but is the most marked increase since that time.

Various theories have been put forward for the recent increase. Examples include the 6 May 2019 announcement by Fidelity Investments that it intends to start cryptocurrency trading and the drop in global stock values following the recent negative developments in the US-China trade war. Some analysts claim that Bitcoin has been used as an alternative investment hedge to gold as global stock markets fell in mid-May.

Does this mean the crypto winter is over?

It is probably too early to claim the so called ‘crypto winter’ of low value (but relatively stable) crypto-currencies has come to an end. For those businesses actively involved in the digital asset and blockchain space, there is a natural determination to see ‘winter’ turn to ‘spring’. Exactly what the “crypto spring” will look like or represent is also difficult to determine at this stage.

The blockchain industry is currently in transition with an ever greater focus on digitised assets, tokenised securities, stable coins and FIAT based tokens. Any crypto spring is likely to involve the expansion and evolution of these asset classes. It is unlikely that we will see a return of utility tokens (tokens granting a right to use a system or software) in the 1.0 version we saw so much of as a tool to fund-raise in 2017 as the industry is now largely focused on links to real world assets.

As a consequence of this, we also think it is unlikely that Initial Coin Offerings (ICOs) will make a comeback as a means of fundraising as the new ‘security token’ asset class (through Security Token Offerings, STOs) are structured to intentionally act as a security in most jurisdictions and therefore be caught within existing regulations.

How have the effects been felt in the BVI and Cayman?

The BVI and Cayman Islands hosted many of the largest ICOs in the world during the crypto explosion in late 2017 and early 2018. The ‘wait and see’ regulatory approach in both jurisdictions suited the new style of blockchain based business fundraising. However, ICOs as a means of fundraising have decreased dramatically due the shift to traditional debt and equity fundraises outlined above, but both jurisdictions still provide a perfect sandbox in which to test these cutting-edge structures.

Today, both the BVI and Cayman are the home of global offshore crypto and digital asset investment funds, tokenised securities, digital curreny exchanges, stable coins and FIAT backed tokens. New enquiries are on the increase as the crypto-currency prices rise and businesses in North America, Europe and Asia look for appropriate regulatory regimes to launch their new and innovative digital asset based funds, coins and tokens.

It’s my absolute pleasure to write my first blog in this space and please look out for many more to follow.

Does the latest Bitcoin surge mean the long crypto winter is finally over?

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