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 Transcript
[AUDIO LOGO]
- Well, with the markets still looking for a thaw in the crypto winter, let's look at what investors are watching for 2023. Joining 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 very own David Hollerith. A big welcome to all of you. So first, I want to start with you Caitlin because a lot of people, they're seeing especially this rise that we've seen in Bitcoin. But what does the landscape actually look like right now when we go sort of beyond a lot of the noise of the headlines?
CAITLIN LONG: Well, there's certainly a lot of optimism in emerging markets where adoption is propagating both of Bitcoin itself and the Lightning Network, which is a layer 2 solution for small value payments that is propagating at a rate that is greater than the rate of stablecoin growth. And what's interesting about the Lightning Network is any currency in the world can be transacted on that one just simply by locking up the amount of Bitcoin to collateralize it.
And so this is essentially a means by which the emerging markets are getting access to US dollars without touching the US banking system. There's a lot of reason for optimism there. However, in the US markets, as you have correctly pointed out, there is a regulatory crackdown underway.
DAVID HOLLERITH: And yeah, and that's a good point. VanEck is a large investor in emerging markets. It also has a Bitcoin price target for $250,000 as of 2028. So with that, I also wanted to point out your outlook for 2023 is that the markets are going to be a bit sideways, mostly for equities has been generally what it sounds like you're saying. So I was curious thinking about that in retrospect. Do you expect Bitcoin's trajectory to follow that of equities as we've seen in the past? Or what's your expectations for it this year?
JAN VAN ECK: Actually, no is the short answer. And I would say, yes, that's a long-term price target for Bitcoin. And I derive that really by saying that Bitcoin could achieve half the total market cap of gold. Both gold and Bitcoin really trade against the Fed. So when the Fed is super tight like it was last year, those are difficult times 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 of 2024. So I think, at least in the second half of this year, it will look really rosier for Bitcoin. Now if I may really quickly, we've had this spurt in the Bitcoin and risk on assets earlier this year. And our basic thesis is that's come from a surprise increase in global money supply that's happened mainly out of Asia in the last couple of months. And I'm happy to talk about that.
- We will come back to that in a moment. Caitlin, I did want to get back to you for a moment, especially considering your platform. You are regulatory compliant. You have transactions across digital assets and traditional financial systems. However, a lot of people who may be looking to get into crypto, they are looking for that insurance that they can kind of count on. And so, when you think about the runway or the timeline towards having crypto assets federally insured, what is that kind of base case build in that you and the team think 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 is not yet taking customer deposits. We are building. And with the regulatory environment in the US so fluid, a crackdown started with the White House, the Federal Reserve Board of Governors, and the Kansas City Fed all on Friday, January 27th where there was a movement against Custodia Bank to deny our membership application to become a Fed member bank.
Subsequent to 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, in fact, quite the opposite. There is a crackdown trying to go after stablecoins, trying to debank the industry, and trying to clarify the magnitude of unregistered securities in the industry.
We're finally getting clarity, the regulatory clarity that this industry has begged for really since I've been involved, which is more than 10 years now. We're finally getting some clarity from the US regulators. And boy, have there been a lot of activities that have been, shall we say, of questionable legal authority and jurisdiction by the agencies in Washington DC.
DAVID HOLLERITH: Yeah. And Caitlin, just to add to that, there's obviously a range of enforcements that have been happening. But if we just focus on Custodia, why do you think the Federal Reserve decided not to allow Custodia to join as a member bank?
CAITLIN LONG: Well, it talked publicly about the novel and unprecedented activities. And Custodia has proposed to cut those out of its business plan. Again, everyone's trying to figure out where's the line here. And is the goal of the Biden administration-- again, this is White House led. Is the goal of the Biden administration to choke off all crypto across the board period, 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's now clear that the wave is quite broad and quite deep. But the interesting question is, if you look at the wave that's taken place, it's debanking the industry. It's cutting off stablecoins-- Fiat-backed stablecoins. And it's also clarifying unregistered securities. Custodia fit into those first two buckets-- a bank serving the industry, it proposed in our business plan, as well as issuing a US dollar stablecoin like instrument called Avit.
We have cut that out of our business plan. And so potentially, they shot the stallion to scatter the herd so to speak as we would say in Wyoming in part because we actually fit into two of those buckets. The real question at this point for the industry becomes, how far is this debanking wave? Is the goal of the Biden administration to completely debank the industry, in which case the entire thing moves offshore?
But because, of course, this is internet native money, it won't go away. And people will still continue to 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, there will be, I think, phoenixes emerging from the ashes so to speak.
- And so then, Jan, for retail investors who really saw some heavy losses here, we're also still seeing institutional investors perhaps still taking a different route as we're seeing retail investors pull back. What is the end game here do you think for some of these institutional investors when they look at the road ahead right now?
JAN VAN ECK: I think institutional investors, frankly, are still licking their wounds after last year and might be opening their eyes to crypto but not doing anything meaningfully this year. And I don't even think retail investors have gotten that involved either so far. I think the-- why are we here?
Crypto has the opportunity of cutting the costs of the financial system by maybe 90% to the consumer and, as Caitlin was talking about, it gives a lot of people who need access to a stable unit of value like the US dollar access to that if you have a cell phone. And so there's a lot of good that can bring to users around the world through crypto. But boy, the regulators are really shooting a lot of-- shooting a lot of horses, to use Caitlin's analogy, recently here in the United States.
What does that mean? I would add one other observation, which is not only does it move activity offshore, which is the reason FTX was in the Bahamas in the first place. But it is also pushing a movement towards decentralization away from the types of entities like centralized exchanges that right now have been getting a lot of market share. So that's really moving more towards a decentralized basis, more peer to peer, more wallets that the government can control even less.
- Thank you so much both of you 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.