Chief executive of Wyoming-based Avanti Financial Group and 22-year Wall Street veteran Caitlin Long says insidious Wall Street tricks may be on the horizon for Bitcoin.
In a recent episode of Disrupt Meister, the former Wyoming Blockchain Task Force committee member says that while there’s nothing inherently wrong with coin lending, she fears that some entities may offer BTC-related products that are not actually backed by Bitcoin.
“There is absolutely nothing wrong with debt and there is absolutely nothing wrong with coin lending as long as it is 100% backed with real on-chain coins. When you start to actually have off-chain claims to Bitcoin that are sold as if they are Bitcoin, and they are no longer linked to the actual blockchain itself, that is when you start to get that circulation credit creeping in. That is the bad type of financialization.
I have called it leverage-based financialization. Another way to call it is uncovered claims to Bitcoin that are not 100% backed by real Bitcoin.
There are lots of ways that Wall Street does this. It’s very insidious and because of the way the accounting works, auditors don’t even catch this either. It is something that builds slowly over time and, unfortunately, I think it is probably coming to Bitcoin.”
Long points out that entities offering products that involve Bitcoin such as the Grayscale Bitcoin Trust (GTBC) and LedgerX are not disclosing public keys. She says regulators should step in to avoid any wrongdoing.
“I’ve been saying that to the regulators. Use the blockchain to your advantage. You can track this stuff and verify that there are no shenanigans happening behind the scenes because gap accounting is not going to pick this up.”