Are family offices investing in cryptocurrencies? Most certainly some are, but how many and to what level is still a complete mystery.
But one family office and the principals behind it are leading the pack more than any other – Winklevoss Capital and the Winklevoss brothers. What they are doing should provide some guidance for other family investment groups looking to invest in the sector – or, at least, educate themselves more about the exotic world of cryptocurrencies.
Immortalised in the film the Social Network through their competition with Mark Zuckerberg over control of Facebook, the irrepressible Winklevoss brothers, Cameron and Tyler, appear to be focused on creating a lasting legacy in the tech world. And cryptocurrencies is perhaps the area they are trying to create that legacy the most.
The irrepressible Winklevoss brothers, Cameron and Tyler, appear to be focused on creating a lasting legacy in the tech world
Much of those efforts are being driven by Gemini Trust Company, a company the brothers set up in 2014. Gemini is an exchange that allows customers to buy, sell, and store digital assets such a bitcoin, ether, and Zcash. With Gemini, the brothers are trying to back up the exchange with as much regulatory, cybersecurity, and compliance standards as possible to further legitimize the market in cryptocurrencies – and get more investors to buy into the sector.
And they took a step towards those efforts early this month when Gemini announced it has secured insurance coverage for custodied digital assets through a global consortium of insurers led by a big name in the sector, Aon.
Gemini is one of the many exchanges trading cryptocurrencies and in terms of volume it’s around 36th biggest cryptocurrency exchange in the world (source: Coinmarketcap) – so it’s still got some way to go to be really big in the world of cryptocurrencies.
Regulation is perhaps the biggest hurdle for much of the cryptocurrency world – until regulators like the Securities and Exchange Commission endorse the sector, cryptos will continue to be a more exotic part of the investment world – for the most part only for connoisseurs and insiders.
The Winklevoss brothers have pushed hard on the regulatory side for a bitcoin exchange-traded fund, but so far with little joy. Those efforts have been rejected twice by the SEC. “They have to convince regulators that crypto exchanges are not being manipulated, and this isn’t easy to do,” says Ian Allison, a reporter for CoinDesk, a cryptocurrency news site.
He adds: “The Winklevoss brothers are now trying to create a self-regulating organisation comprising exchanges and are using NASDAQ surveillance tech.”
What happens with these efforts are still too early to say. But the Winklevoss brothers are pushing in other areas of the cryptocurrency world, which underlines their determination to make serious money from the sector.
This shows we are very early in investment adoption among family office/high net worth investors; more experience & education will affect the J-curve of such adoption
They have backed Filecoin, a data storage network and electronic currency based on bitcoin. Filecoin is part of the lucrative plumbing behind the cryptocurrency boom and that’s why its initial coin offering became the largest token sale up until now, making $257 million in contributions. Winklevoss Capital backed Filecoin at an early stage and no doubt did well out of Filecoin’s ICO last year.
Winklevoss Capital has also backed a less successful cryptocurrency startup, BitInstant, whose CEO was arrested in 2014. No doubt this provided a sharp learning curve for the brothers in the sometimes shadier part of the cryptocurrency world. They’ve done much more due diligence since.
David Nage, managing director of the private investment group Apeiron Ventures and one of the most informed individuals in the nexus between family offices and cryptocurrencies, reckons family offices are still learning much about the sector.
He said in a recent tweet: “What we learned from FO256 (a cryptocurrency and family office conference): a majority (41%) made their first non-BTC/non-ETH investment ONLY in the past year. To me, this shows we are very early in investment adoption among family office/high net worth investors; more experience & education will affect the J-curve of such adoption.”
Perhaps following the efforts of Winklevoss Capital in the cryptocurrency sector can provide a big part of that educational process for family offices.