A version of this post appeared on LinkedIn.
Business journalist Andrew Ross Sorkin, a pirate, and a man dressed up as a bear were just a few of the attractions at Consensus Invest, the annual digit asset outlook event held last Tuesday in New York.
By a quick glance of conference attendees — some in suits, some in jeans and some dressed otherwise—you would never know that bitcoin was trading roughly 80 percent off its all-time high and in the second worst bear market of its existence. While the instant wealth bitcoin created during its meteoric rise last year drove the creation of a whole new industry ecosystem, the cryptocurrency’s freefalling value in 2018 has resulted in multiple casualties. Despite this, business development shows no signs of slowing down.
The audience of traders, lawyers, consultants, technologists and investors were steadfast in their enthusiasm for cryptocurrencies and their conviction about capitalizing on opportunities to bring more innovative products to market. The enthusiasm for coins remains strong, though the focus has migrated from ICOs to security token offerings, or tokens that represent value in real assets like REITs, the U.S. dollar, or precious metals. As more established institutions recognize the potential in the underlying technology of digital currencies, numerous unknowns remain for this industry to address, particularly with regulation.
Below are our takeaways from Consensus Invest:
What is bitcoin? There is no consensus.
Mohamed El-Erian, chief economic advisor of Allianz, argued in a morning fireside chat that bitcoin is a commodity. A few hours later, in the same ballroom, U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton said bitcoin operates like a currency. If the most prominent figures in the financial services industry don’t see eye-to-eye on the most high-profile of the more than 2,500 recognized digital currencies, then companies need to be extra precise in how they communicate potential investments, partnerships, and products to the marketplace. Clear messaging is paramount.
In a world of uncertainty, trust is necessary
In the aforementioned session, Clayton noted that surveillance doesn’t exist for digital exchanges and that issuers need to address this problem before he will be comfortable. The SEC chairman said it would be better if digital currencies were traded on conventional exchanges. In a marketplace where transparency is still evolving, and regulators have yet to plant their flag in a meaningful way, institutional players will need to be stewards of trust and credibility in order to promote broader adoption of digital assets across the financial industry. This outcome can be achieved by thoroughly communicating your regulatory, legal, and compliance framework to the marketplace and being as transparent as possible about your processes and services.
Strategize for extra innings
To some, like Jan van Eck, CEO of VanEck Securities, the market rally of 2017 was a homerun, and 2018 was the year that regulators finally got on base. Next year will be the year of singles. If that’s the case, then crypto firms need to closely manage the expectations of investors, clients, and even their own employees. That means creating long-term strategic communications programs that leverage selective media engagement, speaking opportunities, and content development through which you can articulate your positioning, allowing key constituents to understand both your immediate and future goals within the broader digital currency ecosystem.
If you subscribe to El-Erian’s view that the cryptocurrency market is following a normal innovation cycle—over-consumption, over-production, wash-out, establishing a foundation for rational behavior—then the industry is currently in the middle stages of this process and more challenges are still to come. That means that regardless of what bitcoin is (or isn’t), firms will require offensive and defensive communications strategies so that they are viewed as critical components of the digital currency ecosystem.
Brett Philbin is senior vice president, Financial Communications & Capital Markets, New York.
Jessica Lee is vice president, Financial Communications & Capital Markets, New York.