All I seem to be writing about recently is Tezos.
But I guess that’s because Tezos is making a whole lot of progress.
Hot on the heels of Coinbase’s Tezos staking announcement, Swiss Stock Exchange SIX has listed a Tezos ETP.
For those that don’t know, SIX is Switzerland’s main stock exchange. It’s like the London Stock Exchange for Switzerland.
And an ETP is simply an Exchange Traded Product.
It’s basically like a stock. But instead of it representing shares in a company, it represents an underlying asset. In this case Tezos.
A few companies have released crypto-based Exchange Traded Notes (ETNs) before. But crypto ETPs are a much more important development.
The reason for that is ETPs are legally obligated to hold their underlying asset in a one-to-one ratio. ETNs are not.
SIX already has a few crypto-based ETPs.
On the SIX stock exchange, you can buy ETPs that represent: Bitcoin, Ethereum, Ripple, Bitcoin Cash, Binance coin and a couple of others.
In fact, a year or so ago SIX made a big announcement it was going to be the first stock exchange in the world to run on blockchain.
It also said it expects all stock exchanges to run on blockchain within 10 years. (Source: Reuters.)
Then this summer, it launched the SIX Digital Exchange (SDX).
SDX is basically what Bakkt is setting out to be – only, in Switzerland.
According to SIX, it is, “the first regulated market infrastructure in the world to offer a fully integrated end to end trading, settlement and custody service for digital assets.”
It’s even launching its own stablecoin and having a Security Token Offering (STO) for people to invest in the platform.
(Wow, I’m having to use a lot of crypto jargon this week. Sorry about that.)
But the move into a blockchain-based stock exchange for traditional assets still seems to be some way off.
However, the ETPs I mentioned all trade on SIX’s main exchange.
The reason the latest Tezos one is gaining a lot of attention is the same reason Coinbase’s Tezos listing did: passive income.
The importance of passive income
The idea you can get paid an income without having to work is the holy grail of investing, or even of building a business.
To quote the famous crypto-hating Warren Buffet:
“If you don’t find a way to make money while you sleep, you will work until you die.”
So, the fact that Tezos offers an annual income in the region of 7%-9% is a pretty big deal to many investors.
Especially if they can own it as easily and securely as buying any other stock.
The story isn’t quite as simple as that, however. Nothing ever is, is it?
You see, the company that’s creating these ETPs has to get paid, too. Otherwise, it would be a pretty poor business.
That company is called AMUN AG, and it specialises solely in creating crypto ETPs for SIX.
On the Tezos ETP (ticker symbol AXTZ, if you’re interested) it charges a 2.5% fee per year.
However, it turns out that AMUN AG is using Coinbase custody to secure the Tezos in its ETP.
And Coinbase charges a whopping 25% fee (scroll to the bottom, Coinbase calls it a commission) on its staking returns.
So instead of a 7%-9% reward, you’re looking at around 5.25% to 6.75%.
Then once you add AMUN AG’s 2.5% fee on top, you’re looking at just 2.75% to 4.25%.
That’s about what you could get investing in a standard stockmarket ETF of high-quality dividend stocks.
Still, the passive income will more than cover AMUN AG’s fees and leave you with an okay percentage left over.
And given that most crypto investors are chasing capital gains, not passive income, this Tezos ETP could be a great vehicle for them to use.
Remember, it’s backed one-to-one by Tezos. So if Tezos jumps, say 35% in a day – like it did last week – you’d be capturing all of that gain.
And the same goes for if Tezos loses 35% in a day, too.
That’s the fun of crypto investing.
All things considered, this is a pretty compelling development for crypto.
But it has the potential to be the biggest development we’ve seen for a very long time.
Paving the way for tax-free crypto gains
If you were around crypto in 2017 and 2018, you’ll probably remember the biggest news was always about a potential Bitcoin ETF.
Many different companies tried to create one, and every time the Securities and Exchange Commission (SEC) slapped them down.
You still hear about a potential new Bitcoin ETF every couple of weeks in crypto land.
The main reason a Bitcoin ETF would be such big news is because it would let investors buy into crypto in the same way they do stocks and shares.
And aside from the irony that Bitcoin was built to do away with the current financial system, this would be very good news for a lot of investors.
For example, in the UK you would potentially be able to buy a Bitcoin ETF through a stocks and shares ISA.
That would mean any profit you made from that investment would be tax free.
Well, in theory, you don’t have to imagine. All you need to do is find an ISA account that lets you invest in Swiss ETPs. Namely the ETPs I’ve just been talking about.
Remember AMUN AG now has ETPs listed on the Swiss stock exchange that represent Bitcoin, Ethereum, Ripple, Binance coin and Tezos, among others.
I wish I could now tell you I have found just such an ISA. But it doesn’t exist… yet.
However, it’s only a matter of time until an ISA comes along that does let you invest in these ETPs.
And it’s also only a matter of time until we see similar investment products on the UK and US stockmarkets.
When that happens, even your run-of-the-mill ISA will let you invest in crypto completely tax free.
And on that note, I have some more Bakkt news at the end of this piece.
In the meantime, if you want to know more about the Tezos ETP, here’s a link to AMUN AG’s fact sheet on it.
Volvo turns to blockchain to verify its supply chain
Last week it was Coca-Cola, this week it’s Volvo.
On Monday, Coin Telegraph reported Volvo is now using Oracle’s blockchain to verify the origin of its raw materials.
Tracing the story back a little further, we can find an official press release by Volvo… because who trusts crypto websites, right?
In the press release Volvo says the main thing it’s concerned with is the traceability of its cobalt.
Cobalt is a key ingredient in its new, electric XC40.
It is also a highly controversial commodity. A lot of it is mined in the Democratic Republic of Congo by corrupt companies using child labour.
From Bloomberg on the 15th of November 2019:
“Child labor and human-rights abuses are common in small-scale mining sites in Congo, where independent, artisanal miners dig by hand, the OECD said in a report published Friday. While companies have been trying to address these concerns, they should also mind reports of corruption among the country’s biggest mining firms, the Paris-based organization said.”
So, it’s easy to see why carmakers and battery companies are keen to prove the origin of their cobalt.
No one wants to be seen supporting child labour – especially if you’re trying to win hearts and minds with an electric car offering.
From Volvo’s press release:
“We have always been committed to an ethical supply chain for our raw materials,” said Martina Buchhauser, head of procurement at Volvo Cars. “With blockchain technology we can take the next step towards ensuring full traceability of our supply chain and minimising any related risks, in close collaboration with our suppliers.”
This is just one of the many reasons major companies are turning to blockchain for their supply chain solutions.
But it’s not just companies. It’s entire countries. And major ones at that.
French and Chinese presidents eat VeChain product – price jumps 63%
VeChain has been getting a lot of attention over the last couple of weeks, thanks to its latest food traceability project: Foodgates.
Basically, Foodgates is a way to trace food from production to plate, even over international borders.
And to prove how well the solution works, Foodgates had a tasting of prime French beef at the China International Import Expo on the 5th of November.
The reason this tasting made the (crypto) headlines was because of who was tasting it – Chinese President Xi Jinping and French President Emmanuel Macron.
You can see the publicity photo below.
Source: Chinese state media
According to VeChain’s official blog:
“This event is especially significant after President Xi had recently embraced blockchain technology and urged its development on a national level in China. VeChain, being a global blockchain technology platform provider with significant resources in China and Europe will be a direct beneficiary of this bullish shift by the second largest economy in the world.”
As you can probably imagine, VeChain has been doing pretty well since this news. As I write this, it is up 63% since the 5th of November.
If you’re not familiar with VeChain, it’s been making some major headway over the last 12 months or so.
It has partnered with two of accounting’s “big four” (PwC and Deloitte). As well as a number of major players, including DNV GL and Walmart.
In fact, thanks in large part to a traceability deal it has with Walmart China, VeChain was processing more transactions than Ethereum back in June.
Although looking at the numbers today, I can see Ethereum processed around eight times as many transactions as VeChain did over the last seven days. (Source: blocktivity.)
Still, you’d be hard pushed to find a supply-chain crypto with more deals and better partners than VeChain.
And finally, a bit more Bakkt news
On Monday the 11th of November, Bakkt announced it was expanding its Bitcoin custody service to all institutions.
The service is called Bakkt Warehouse.
It is designed to allow institutions a secure way to get into Bitcoin. And presumably offer Bitcoin-based products to their clients.
Up until last week, it was only available to Bakkt’s Bitcoin futures clients. But now that it’s available “to all institutions”, Bakkt has already begun onboarding clients.
The first wave was Pantera Capital, Galaxy Digital and Tagomi. But I’m sure we’ll see many more in the coming weeks.
“Our relationship with Intercontinental Exchange (NYSE: ICE), a Fortune 500 company that owns and operates the market infrastructure upon which the world’s largest financial institutions already rely, enables us to uniquely address client needs in the digital asset custody space.”
You might remember I said the Tezos ETP listed on the SIX stock exchange was using Coinbase custody.
Coinbase got there first with its custody solutions, no thanks to Bakkt’s endless delays.
But now that Bakkt is up and sprinting, we might see an influx of new crypto-based financial products hitting the market.
Coinbase is all well and good, but as Bakkt says, it has a very special relationship with the company that owns some of the biggest stock exchanges in the world.
If anyone is in a position to get a Bitcoin ETF out the door, it’s Bakkt.
And once we have that, crypto gains can effectively become tax free.
Wouldn’t that be something.
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