Boca Bits: Notes from Day Two of FIA Boca-V 2021
Day two of FIA Boca is traditionally the session with the most energy and focus and that will likely be the case again this year, even though the event is being held virtually rather than in person in Boca Raton, Florida. This year the day two energy was due to the fact that the theme for the day was innovation while the lower energy of days one and three for the in-person event have something to do with the fact that day one is truncated as attendees arrive and day three has many people that are worn out from back-to-back-to-back business meetings, time on the golf course, late nights at Bar Luna and, sometimes, all three at the same time.
Keynote Kickoff: In the Age of Surveillance Capitalism
Rana Foroohar, global economic analyst and columnist for the Financial Times, kicked off the day with a lively yet sobering view of the world in what is called by some the era of surveillance capitalism. Foroohar touched on topics as diverse as the economic tug of war between the U.S. market led economy, Europe’s reliance on technocrats and the state led power in China as well as the might of technology giants like Facebook, Amazon, Google and Alibaba that now rival nation states in their influence. She offered no simple answers or prescriptions for issues like cryptocurrencies and data privacy but left off with the idea that there will be a shift in the political conversation in the U.S. from “we are consumers” to “we are citizens”.
Innovation is spelled: C-R-Y-P-T-O-C-U-R-R-E-N-C-Y
The next three sessions dealt with the hot, hot topic of cryptocurrencies, beginning with views from the exchange leaders (CME, ICE, Nasdaq, LSE, SGX and Cboe), turning to a one-on-one between DRW’s Don Wilson and Michael Saylor from Microstrategy and culminating with a crypto focused panel led by Chris Giancarlo.
Of the three, the exchange leaders had the least to say. While they are all involved in cryptocurrency / cryptoasset markets in one form or another they are, by and large, relegated to the sidelines as cryptomarkets grow like mushrooms outside the bounds of traditional finance. That’s not likely to change anytime soon.
Michael Saylor is an anomaly in the corporate world: a CEO of a publicly traded company that has gone all in on Bitcoin. The basic premise of his action is that central banks unleashed so much monetary liquidity into the financial system because of the Covid 19 pandemic that the true cost of capital has risen to greater than 20%. With $500 million on the books at Microstrategy he went looking for a way to invest it before it “melted like an ice cube” and settled on Bitcoin because in his eyes it was “perfectly designed by an engineer as an inflation hedge”. He may or may not be right about the debasement of fiat currencies or BTC as an inflation hedge but you can’t argue about the results so far from his strategy: he took the $500 million from his company that had a $1 billion valuation, increased his position as BTC rose so that a total investment of $2 billion has risen in value to $5 billion. Not a bad day at the office.
The crypto track was rounded out with a panel discussion called “Crypto Goes Mainstream”. While the title is more than a little aspirational (“is going” mainstream perhaps?), the panel highlighted some of the exciting ways that crypto is growing. Led by former CFTC Chairman Chris Giancarlo and featuring Tom Jessop from Fidelity, Zac Prince of BlockFi and CMT Digital’s Colleen Sullivan, the panel highlighted many interesting trends in crypto as well as just how far removed the development of these markets is from traditional financial channels, including futures and derivatives. Sullivan represented the prop trading community that blazed an initial trail towards crypto and is now leading the way to a DeFi future, Prince exemplified the ways in which new players are delivering essential products and services to the burgeoning community and Jessop personified how traditional financial institutions are slowly building a crypto presence. In a lightning round of questions from Giancarlo at the conclusion of the session, “Harriet” got two votes as the name for the yet to be created digital dollar, bitcoin is likely the first cryptocurrency to be accepted as payment for registration at FIA (although Sullivan said that no one wants to part with BTC these days!), the U.S. will be the first country before the U.K. and Germany to list a BTC ETF and the CFTC will register the first DeFi DCM some time in the next ten years. You heard it here first!
Let’s Talk Fintech
The latter half of the session broadly covered the concept of fintech innovation. Beginning with thoughts from the exchange leaders and progressing to a one-on-one with Derek White from Google Cloud and ending with a fintech panel led by Charlotte Crosswell, innovation was viewed from interesting angles both within and outside of the futures industry.
As with crypto earlier, the exchange leaders generally did not fare well. Generally, their responses were often PR boilerplate and failed to capture the fire and imagination that characterizes so much of the fintech sphere. David Schwimmer of LSE was the most inspiring, mentioning an investment in a company that is using blockchain to digitalize the capital raising process and in Primary Bid, which aims to bring fairness to corporate fundraisings. Interestingly, Nasdaq may be the closest to being a pure tech play among exchange and they were not represented in this segment.
The appearance of Derek White from Google Cloud may be the first time that a representative from a FAANG (Facebook, Apple, Amazon, Netflix and Google) company addressed an FIA crowd. With an impressive record of innovation at companies like Barclays, BBVA and U.S. Bank, White exemplified how big ideas become reality through the application of the cloud and all that comes with it. His message at the end of his talk that success is predicated on a recognition of possibilities by company leaders and an appetite for learning at the top of organizations is a key to success. It’s time to recognize that technology possibilities have changed.
The final session of the day was “Technology — Changing How Markets Operate”. Ably moderated by Charlotte Crosswell from Innovate Finance and featuring a diverse group of panelists including Mark Beeston of Illuminate Financial, Nasdaq’s Brenda Hoffman and Donna Rudnicki from RBC Capital Markets, the panel revealed how much the appetite for change and new solutions has come over the past few years. As with so much else in our lives, Covid 19 has accelerated change and hastened innovation in ways that will likely continue. In particular, larger institutions such as RBC are much more open to working with small, innovative firms in a way that was impossible just a few years ago. It could be that the fintech evolution is turning into a revolution.
On to Day Three and an Ask to Please Help
The third and final day of FIA Boca-V will focus on sustainability. I will send a recap of the day along with final thoughts on the event over the weekend. In the meantime, please visit Futures for Kids and make a donation. Futures For Kids was launched in February 2008 as a charitable foundation of the listed and cleared derivatives industry to support the lives of disadvantaged children and young people around the world. Every $50 that you donate earns you a chance to win a three day stay at The Boca Raton Resort and Beach Club. Not too shabby!
Disclosure: I collaborated with Derek White and his team at Google Cloud through my association with Maven Wave Partners on a soon to be published white paper on digital transformation in financial services. Let me know if you would like to receive a copy of this white paper.
