22 May 2020
By Adam Brown, Strategic Projects Manager
A Slice of Alternatives
Over the lockdown period, there’s a chance you may have had a takeaway pizza (or two). And while you have probably paid for those pizzas online or through a contactless card or device, it’s less likely you will have settled the payment in any sort of cryptocurrency.
Interestingly, though, today (22 May) marks the tenth anniversary of ‘Bitcoin Pizza Day’ (BPD), the day of the first known Bitcoin transaction, when Laszlo Hanyecz bought two pizzas for 10,000 Bitcoins – around US$41 at the time. That works out at around US$90m in today’s prices.
As well as this being evidence of Bitcoin, and other cryptocurrencies, having a real-world application, it’s also a reminder of the journey virtual currencies have been on as an investment opportunity over the past ten years.
It’s a journey Jersey, as an innovative jurisdiction, has been part of too. In 2014, the Jersey Financial Services Commission (JFSC) approved the launch of the world’s first regulated bitcoin investment fund, GABI Plc, which went on to create Jersey-domiciled CoinShares – Europe and Asia’s largest digital asset manager with more than US$700 million of assets under management.
While in 2016, the JFSC brought enterprises providing ‘virtual currency exchange’ services under Jersey’s regulatory umbrella; and in 2019, the world’s largest cryptocurrency exchange, Binance, selected Jersey as a base to help drive forward its European market strategy.
It has been Jersey’s forward-thinking approach on sensible, pragmatic regulation, as well as its range of suitable corporate and fund vehicles and its technical, legal and financial expertise, that have really helped Jersey carve out a compelling proposition in this space.
In partnership with Digital Jersey, it had been our intention to mark BPD this year with a pizza themed event to give professionals an opportunity to hear from leading crypto experts about their experiences over the past ten years, all while enjoying a slice of quattro formaggi. Regrettably, current circumstances have conspired to put that event on hold.
However, BPD does still give us a chance to reflect on the evolution of investments in today’s volatile market – because what we have seen over the past decade is that crypto assets have become an important addition to the alternative investment landscape.
And in today’s highly uncertain environment, investors will be looking increasingly to diversify their allocations to suit their risk profiles. Against cash and government bonds, for instance, the valuations of alternative asset classes are looking more attractive – private equity, for instance, looks likely to remain a core focus for institutional investors in the long term.
Recent figures from Preqin for the first quarter of the year suggest that, despite the short to medium-term uncertainty, level heads will prevail – fewer than 10% of private equity investors say they are planning to allocate less to the asset class in the long term, with almost 30% saying they intend to allocate some or significantly more.
In addition, hedge, global equities, high yield bonds and crypto assets might well feature as part of the diversification plans of investors who are focused on the long term and are ready to ride out the short-term uncertainty.
Jersey, as a centre that has positioned itself so strongly in the alternatives space having ended 2019 by posting record figures for total assets under administration (£346bn), is absolutely ready to support this anticipated trend.
In fact, its resilience and appeal as a certain, stable and expert jurisdiction for alternatives has been reflected in recent activity. Over the past couple of weeks, Jersey has played a pivotal role in bringing some notable funds to market – the US$4.5bn CVC Partners Asia Pacific Fund and two Index Ventures funds with combined value of US$2bn, for instance.
Laszlo might not have realised it at the time, but a decade ago, investors were on the brink of entering new ground in the crypto space – a space that has since seen significant sophistication, evolution and progress.
Ten years on, investors are continuing to look for opportunities that can balance their appetites for risk and yield – and they will need expert, robust support to help them do that. There’s no doubt that Jersey remains open for business to support such investor strategies through these challenging times.
Some food for thought, perhaps, as we look forward to enjoying a slice of pepperoni this week… Happy BPD!
To find out more information on Jersey’s fintech sector and activity, please click here, or contact Adam Brown (details below).