Wealth management advisors want to grow their crypto offerings

Cryptos are an opportunity, especially with the return of inflation and at a time when the Livret A is at its lowest,” explains a wealth management consultant (CGP) whose firm is working to offer crypto products with guaranteed passive returns to individuals “in November – December, if all goes well. Many people have invested in cryptocurrencies but are looking for reassuring solutions to make them work. The ways to find returns are diverse, but not without risk.

Making stable coins work

One of the first French players to launch is none other than Coinhouse with its Crypto Passbook in the fall of 2021. The latter offers its customers the opportunity to grow their stablecoins, in exchange “at a fixed rate (5%) […] a yield higher than that of traditional products,” suggests the site of the “cryptobank” which recently raised 40 million euros. “We want to reinvent saving, we want to do that in the coming years,” says CEO Nicolas Louvet.

Stablecoins have the advantage of having a fixed price. They are backed by an underlying fiat or crypto currency. In particular, they ensure that traders who are adherents of decentralized finance (DeFi) do not have to control volatility when borrowing with leverage.

A customer deposits their stablecoins on a crypto platform which then makes them available in DeFi through smart contracts, configurable computer programs. They are made available to investors who pay interest on these loans with which the platform reimburses itself and its customers. Unlike Livret A, sometimes it is not possible to withdraw your investment at any time, which in smart contracts can remain available for several days. The risk of a liquidity crisis exists, as evidenced by the setbacks of the US Celsius Network, which today blocks withdrawals, transfers and exchanges for its customers.

Staker, or validate on a blockchain

Some players, such as Aave, a DeFi protocol or US start-up Lido, offer returns on the revenue received as a validator on a blockchain operating in proof of stake (PoS). Unlike the proof of work (PoW) that bitcoin works with, PoS validates blocks based on the number of tokens immobilized in the blockchain, in exchange for a reward. For example, Lido offers to stake the ethers of its users, who will thus receive a portion of the perceived return.

The downside is that a blockchain token is by definition volatile, which can eventually change the amount involved. There is also a risk if the blockchain is hacked or disappears.

Bitcoin mining income

In the midst of the boom, Asic computers specifically designed to mine bitcoin were trading for up to $20,000 per unit, for the most recent. But it is impossible to mine this cryptocurrency in Europe, due to the unaffordable price of the kilowatt hour of 21 cents, with the breakeven point being around 8 cents.

For example, the French company Feel Mining offers to place Asic computers purchased by their customers in their mining company in Iceland or Canada. The latter receive part of the received bitcoins as a reward without having to manage the logistics costs. “We are currently working with bitcoin miners who offer these types of schemes. It is also a way to promote and invest in mining with electricity from renewable energy sources,” explains a CGP.

Asset tokenization

Will all financial assets one day have a digital representation circulating on a blockchain? This is the bet of investors and companies, such as RealT, which has been offering this type of investment since 2019. “Before launching in cryptos, we worked in real estate with my partner Rémy Jacobson. It was therefore natural to offer tokenization on an asset that we already knew,” said Jean-Marc Jacobson, co-founder of RealT.

Tokenization is now mainly offered in real estate. This practice aims to optimize investments and make them more accessible. “With tokenization, you can trade or invest in assets in seconds, whereas in a bank it would take a few weeks,” explains Jean-Marc Jacobson. Currently, one of the largest European miners is working with RealT’s technology to lower the entrance fee for its investors. Several CGPs we interviewed are also working on a green bitcoin mining tokenization system to offer it to their customers.

Reassure as much as possible

The challenge for players looking to enter this market segment now is to reassure as much as possible. For example, by registering as a service provider on digital assets (PSAN) with the Autorité des marchés financiers or by highlighting their expertise and guarantees in case of turbulence that characterizes the crypto market.

“For our part, we do not rule out a reduction in the rate of our Livret if we are unable to guarantee the promised returns. For the time being, that has not happened yet,” explains Manuel Valente, scientific director at Coinhouse for whom the choice of partners is essential. “Caution is advised. For example, if we see a promise of a 30% return, it is immediately no”. On cryptos as elsewhere, the return remains proportionate to the risk.

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