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Howey Test and ICO’s – Fear versus Greed

Just a response to this post

U.S. ICOs shouldn’t be scared of the SEC

Yes, you should be scared of the SEC, but figuring out what you should do ends up being a fight between greed and fear.  The article argues that people shouldn’t be afraid of the SEC because an ICO doesn’t pass the Howey Test for securities.  The problem here is that you can interpret the law in a number of ways, and there hasn’t been an official interpretation involving ICO’s.

The argument that ICO’s are not considered securities because you are paying in ethereum and not money, turns out not to work that well.  It turns out that in subsequent court cases (see State v. Gopher Tire & Rubber Co.) that anything of value satisifies the money test.  Now this is all subject to interpretation, and so the SEC *could* take the position that exchanges for virtual currencies would not be considered securities, or it could take the opposite position.

The view that “well my friends in the SEC don’t want to regulate ICO’s” is useful and that’s why former staff members of the SEC can get pretty high paying jobs being consultants.  But if you are running a fund, you’d usually want something in writing.  It turns out that the SEC has a formal process for declaring something “not a security” called a “no-action letter.”

https://www.sec.gov/fast-answers/answersnoactionhtm.html

You write a letter to the SEC saying that “I don’t think X is a security.”  If the SEC has written back a letter saying “We agree with your argument that X is not a security” you are in the clear.  The trouble is that while the SEC might informally want to argue that if you pay an ICO with ethereum, that it’s not a security, they haven’t actually put that in writing anywhere.  If the SEC did that this would be a game changer, but they haven’t.

At this point, it’s a battle between fear and greed.

The good news is that if you can argue that you are trying to follow the law in good faith, you won’t end up in jail.  In order to bring criminal sanctions, they have to demonstrate that either you have an “evil mind” or that the law is “strict liability” in which case you can go to jail for merely breaking the rule.  If you are trying to follow the law, but no one knows what the law is, then you are obviously not of an “evil mind” and also it’s almost impossible to argue that the rule is “strict liability” if no one knows what the rule is.

However, if the rules change, you won’t go to jail, but you might lose a lot of money.  The SEC can impose civil sanctions, or they might go after you to set up a test case, and even if you win you might be paying lots of lawyers.

At that point the fear/greed ratio changes based on who you are.  If you  are a startup that’s just starting an ICO, you have very little to lose.  Once it’s obvious that you aren’t going to end up in jail, then the worst the SEC can do is to put you out of business and cause you to eat up a lot of your time and effort.  But if you do nothing, you are out of business, and the SEC is just going to be one annoying thing that you have to worry about.

If you are an investment bank, then the fear/greed ratio works in the opposite direction.  You are already making a ton of money, and if you go into ICO’s, then there is a good chance that the SEC may want to make an example of you in several years when everything goes bad.  It’s also likely that you are hiring a bunch of expensive lawyers, that won’t make any extra money if things go well, but will lose their jobs and reputation if things go bad.

Now you’ll find people at other parts of the fear/greed spectrum, but the fact of the matter is the law is ambiguous so what happens next depends on how fear and greed interact.

But one thing about fear versus greed is that you can sometimes reduce the fear.  One question that you have to ask yourself is “Do you really have to operate in the US?”  If they answer is no then you can remove a lot of issues while making the same money.

At the point, I have to put in a good word for Hong Kong as an ICO center.  First of all, in HK, the definition of securities is much, much clearer.  In the US, they have a vague standard which has been interpreted by the courts.  In HK, the laws and regulations themselves are much longer, but they end up being clearer.  Second, the consequences of being a security are much less.  You can basically comply with most securities regulations by not “actively marketing” the ICO in Hong Kong.  One structure that works very well is to have the legal domicile of the ICO be outside of HK, and use HK as a base of operations.   Third of all, you don’t have to hire an extremely expensive person that used to work for the SEC to find out what they are thinking about.  You can talk directly to the SFC and HKMA, and they can tell you what they are worried about.

Finally. Something the HK regulators can do to promote fintech

One funny thing about Hong Kong is that it’s hard for the regulators to do anything because it turns out that the regulations are pretty good.  Once you look at the regulations it turns out that you can do something without asking for permission.

But I finally found something useful the regulators can do.  It turns out that lots of bankers in Central want to put money into cryptocurrencies.  They go to compliance to ask for permission and compliance says nothing.  This puts them in a very awkward situations.  It’s especially bad, since the bankers that are particularly innovative see this as the future.

What SFC and HKMA can do is to issue regulatory guidance saying that bank employees and securities firm employees can trade coins on their personal account.

 

Grumpy comments on blockchain

Something that really bothers me is that I’ve been hearing about blockchain for two years, and there are things that could be really useful to be with blockchain.  But I’ve found that every single blockchain system that I’ve come across is completely unusable for my coffee trading and anything else that I’m doing.

So this is what I need.  I’m trading coffee with someone else.  We have a lot of documents, we have a lot of spreadsheets, we have lots of e-mail.  Right now we are dumping them all into google drive, but it turns out to be difficult/impossible to selectively share documents with other people.  What I’d really like is some easy to use blockchain system in which I can save a document, in which I can do version control, and get notifications if someone has annotated a document.

Integrated systems will not work – So the problem I’ve seen with all of the blockchain solutions that I’ve seen right now is that they are intended to be integrated systems in which the entire workflow exists in that system.  This simply will not work with any sort of supply chain.  Here is the problem.  I have buy coffee from a farming cooperative in Tanzania and sell it to a wholesaler in Hong Kong.  I am not in a position to ask them to change the way that they do business.  I can implement a blockchain solution in my part of the supply chain, but I cannot get them to implement a solution in their parts of the chain.  Also, I have to deal with different suppliers and different distributors, all of whom have their own systems.

The only situation in which an integrated system might possibly work is if you have a single firm that already coordinates all of the parts of the supply chain (i.e. think Walmart).  The trouble with that situation is that if you have a single firm that already has vertically integrated the supply chain, then they likely already have an internal ERP system, and they don’t need a blockchain.

Walled gardens will not work – One thing that strikes me about blockchain solutions is that all of them seem to assume that they are the only software or blockchain in the world, and they don’t have any obvious way of slicing off part of the system and working with existing software.  It turns out that I do a lot of my stuff on gmail, wordpress, and I have set up Odoo as an ERP system.  Any sort of blockchain system will have to somehow work with all those systems.  I need to be able to do stuff like pull a document from the blockchain, make some edits or annotations, and then publish that into the blockchain.

With all of the talk of distributed ledger, I really need a distributed ledger.  What I want to do is to pull in a list of payments and cash transfers into Excel, add a new entry, and then publish that on the blockchain.

I haven’t seen a single system that even begins to integrate with Excel, Word, e-mail, chat, and ERP software.  Also everyone seems to want to be the “one true blockchain” and no one has dealt with the reality that any real business transaction is likely to require integrating data from many, many different sources some of which are not digital.

Fixed workflows will not work – The other thing that strikes me about blockchain systems is that they assume that you have a fixed workflow, when in fact you need the flexibility to do new stuff.  For example, as part of my coffee distribution, it turns out that the distributor would like publicity photos of the farmers growing the coffee.  At that point you get into interesting issues, because you really need the farmers permission to use the image, and you also need to make sure that if they become the face of Tanzanian coffee in Hong Kong that they get properly compensated.  This is perfect for something involving blockchain, since you can attach the releases and the IP contracts with the actual photos.  But the problem is that this is just one of those problems that comes up, and if it takes months to put together some sort of solution with blockchain, then it’s not going to work.

But this is part of a bigger problem in that every industry has their own workflows, and the workflows can change radically.  The big problem that I’m seeing with a lot of blockchain solutions is that they have the effect of making workflows more inflexible, and that can kill productivity.

The travel agent fallacy – There is one blockchain company that I’ve worked with and I don’t want to embarrass them, because they are good people, but I used their system to optimize a business process and it turns out that it’s taken far longer to deal with that business process than if I just filed paper.  The problem is that they had the assumption that you could replace a lot of the people with computer forms just like you replaced travel agents with airline booking systems.  The trouble is with that thinking is that it turns out that people book travel a lot and it turns out that it’s a process that can be standardized.   This particular business process is something that people do once in a blue moon, and it turns out that there are all sorts of ways to fill out the form wrong.

Also there is a particular problem with using blockchain since they want to decentralize the system so that you have a private key that you use to access your information.  It turns out that I’m forgetful, and I have at one point lost the private key which meant that I had to junk the old filing which is no longer reachable, and start all over again.  You get into some UI issues.  If I have a private key to a bitcoin wallet, then I’m going to make very, very sure that I don’t lose the key.  However, it turns out that you will go insane if you treat everything as a keys to cash.

The other problem is that the business process is low priority and I keep putting it off so that I need someone to gently nag me to fill out the form. It turns out that this “nagging” is something that requires a human being since they need to figure out that I really want to get the form finished.

Missing hyphens – One other reason I think that blockchain solutions have limits is that they are trying to replace people with machines, and machines are terrible at some things.  For example, I’ve been spending the last week trying to do a transfer between a bitcoin exchange and my bank account, and it turns out the problem is that my name in the exchange has a hyphen and my bank account doesn’t.  It turns out that most of the manual processing in supply chain and international business has to do with stuff like that.  So if what will happen is that if you try to over-automate the system, you’ll end up with something that is very, very brittle, and which will fail under some pretty simple cases.  Now you can try to force everyone in the world to standardize the spelling of their names, and standardize database keys, but that involves making people act like machines, and the result could be rather dystopian.

So what do I need from blockchain

file sharing – I need a way of uploading documents in a way that the document can be timestamped and authenticated, and then shared.

revision control and notification – I need to be able to track changes to a document and to know when a document has been annotated.

system integration – I want to be able to modify a distributed ledger using Excel and to be able to swap data with gmail

fast to learn – It should take me no more than a day or two to set up the system and start using it.

non industry/workflow specific – I want to have the system work with my current workflows.  Also it makes no sense to be industry specific.  Let’s suppose you create one blockchain for supply chain, another one for insurance, and a third for banking services.  It turns out that a business needs supply chain, insurance, and banking, so what do you do then?

Why I’m optimistic about Hong Kong

I’ve been in so many “Hong Kong is doomed” conversations, that sometimes I feel weird because I happen to believe that Hong Kong is not only not doomed, but I happen to believe that Hong Kong will lead the world in crypto.

The reason for this is the Basic Law of Hong Kong.  Hong Kong is the *ONLY* place in the world where free trade, free enterprise, and the free flow of money is not merely a good thing, but it’s a constitutional right.


Article 110
The monetary and financial systems of the Hong Kong Special Administrative Region shall be prescribed by law.

The Government of the Hong Kong Special Administrative Region shall, on its own, formulate monetary and financial policies, safeguard the free operation of financial business and financial markets, and regulate and supervise them in accordance with law.

Article 112
No foreign exchange control policies shall be applied in the Hong Kong Special Administrative Region. The Hong Kong dollar shall be freely convertible. Markets for foreign exchange, gold, securities, futures and the like shall continue.

The Government of the Hong Kong Special Administrative Region shall safeguard the free flow of capital within, into and out of the Region.

Article 114
The Hong Kong Special Administrative Region shall maintain the status of a free port and shall not impose any tariff unless otherwise prescribed by law.

Article 115
The Hong Kong Special Administrative Region shall pursue the policy of free trade and safeguard the free movement of goods, intangible assets and capital.


 

It turns out that these basic rights are not merely propaganda but they are judicially enforceable.  You can take a suitcase of full of paper cash come to Hong Kong, exchange it for bitcoin and leave.  This is not merely legal, but you have a *constitutional right* do to so.

But you might ask, what about the terrorists?  What about money laundering?  What about criminal activity.  And that is what makes Hong Kong different from every other place on the planet.  In every other jurisdiction, a politician can just talk about terrorists and that would be the end of the story.

In Hong Kong, cracking down on cash is like shutting down a newspaper or raiding a church.  Yes, you might be able to do it, but you’d better have a damned good reason.  In the case of Hong Kong, because moving money is a constitutional right, if the HK government wants to impose restrictions of moving money, then they have to first get the legislature to pass a law, and second you have to be prepared to defend the measure in court.  If the Hong Kong government wanted people to not handle cash, then they would have to convince a judge that 1) there is a public interest in doing so and 2) the measures that they are putting in place are proportionate to that public interest.

So what that means this that it’s not enough for the government to merely talk about terrorists, they have to prove in court that the measures they are putting in place actually reduce terrorism.  And you run into the problem that they don’t.  It turns out that most terrorist groups and drug runners are surprisingly open about where they get their money from (ISIS has a nice brochure), and once you look at it it’s not mainly from foreign donations.

One thing that I’m amazed about is why Hong Kong isn’t louder about this, and I think a lot of this has to do with peer pressure.  All of the cool kids are passing counter-terrorist legislation, and the Hong Kong regulators just want to be one of the “in crowd” rather than to do something different and original.  One thing that I find funny is that at the highest levels of world finance and politics, a lot of it feels like high school, in which you have the “popular crowd” and everyone else wants to fit in.  Once the “in-crowd” wears a certain type of jewelry or passes counter-terrorism legislation, then everyone else wants to do it.  People are people.

 

 

Cryptocurrencies – Why diversification makes no sense

The cool thing about the interest in cryptocurrencies is that there is now some interest in things like valuation, and I’ve seen people take an index investing approach, and my strong opinion is that this will not work for the current generation of cryptocurrencies.

A lot of index investing comes from investments in US/Europe equity markets where index investing works beautifully.  The thing is that it happens to be a *terrible* strategy in Asian markets, and if had tried passive index investing in any Asian market, you would have ended up with terrible returns.  The question is *why* that happens.

So in the US, you put money in the stock market.  Magic stuff happens, and the value of thing that you put money in increases and you get it.  You put money into a pie, and the pie grows.  In that situation the easy thing to do is to put your money into the system, and get your share of the pie.

In Asian market it doesn’t work that way.  You put your money into a company.  It turns out that there are all sorts of ways that an Asian company can make a ton of money, and none of it goes to small shareholders.  So you put your money in the pot, and it doesn’t magically grow.  It actually shrinks.  At that point, you don’t want your fair share of the pie, you actually want to “get lucky” so that you get more than your fair share of the pool.  If you want to do passive investing in Asia, put your money in real estate.

Now a lot depends on how you think the current generation of crypto will go.  My feeling is that the current generation of crypto *won’t* generate value for investors, and as such the investment characteristics of crypto is more akin to gambling at a casino than with playing the US stock markets.  In fact, the current crypto system looks a lot like a lotto.  It turns out that lottery tickets are often used to fund socially-useful things.  I do think that on the whole, all of the money that is going into crypto, is socially useful.  It’s putting money into basic mathematical research, and keeping geeks from starving.  This is not very different from the fact that the HK government uses horse racing to fund free clinics and high energy physicists.

But once you realize that the money that you put into crypto has no real way of getting back to you, at that point you are playing a casino game, and casino rules apply.  Find a table where the cards aren’t marked, don’t put in more money than you can lose, and have fun.

One more thing…..

I’ve been playing with valuation models for cryptocurrency, and it turns out that there is some interesting stuff.  Imagine a world in which bitcoin is the world’s only currency, and that everyone uses bitcoin for every economic transaction.  It could happen.  But how long do you think it would take.  Maybe 10 years?  20 years?  Yes I can imagine a world in which bitcoin is used for everything, but it’s not going to happen in the next 3-5 years.

That impacts bitcoin valuation.  Some quick math shows that if bitcoin goes about 1000x, then the amount of bitcoin in circulation would be roughly that of the total value of assets on the planet.  So the numbers basically show that bitcoin can’t go up in the future like it did in the past.  Also, if you use this sort of analysis then the price of bitcoin sort of makes sense.  People are routinely using bitcoin for USD million transactions between Russia and China, and if the price of bitcoin was where it was five years ago, you just couldn’t do that.

How high bitcoin will go depends on whether you think bitcoin will be used for billion dollar transactions, and when you think that will happen.  Personally, I don’t think bitcoin will be used for those type of transactions, but you can figure this out for yourself.

This points out the other problem in a diversification strategy.  It’s not that inconceivable for a company to go 10,000k from USD 100,000 to USD 1 billion, but once you are at USD 1 billion, another 10k growth gets you to take over the the entire GDP of major nations.  What that means is that if you are looking for hyper, insane growth, you need to look at the really tiny deals, but the odds that someone will let you in on the tiny deal or that you’ve even heard of the deal is pretty low.

Hong Kong Bond Market discussion – Saving Hong Kong and the Planet

I’d started writing this before Trump pulled the US out of the Paris Accord on Climate Change, which strikes me as insane from both environmental and business.  There is about to be a truly stunning about of money to fund eco-friendly projects.  On the one hand it’s going to save the planet.  On the other hand, processing all of these green bonds is going to provide a huge number of jobs in HK.  You got people that want to save the planet.  You have got people that want to make money on projects that save the planet.

So………

I had the good fortune to be invited to a discussion group on developing the HK bond market recently.  There were a number of mid-level policy makers and executives from the banking industry, and the discussion was taken under Chatham House rules which means that what is said is public, but who said it is private, which is good since it means that I can blog about it.

One reason that I feel it necessary to blog about this sort of thing is that there is a huge lack of communication between various levels of HK society, and it means that things look very different, and you have major, sometimes dangerous gaps in communications.  One thing that was the situation is that I was the only person there not in a business suit, and I was still dressed in business causal, which would been way, way over-dressed in a group of students or computer nerds.  The other thing is that I felt good and optimistic during the talk.  People are talking about all of the things that Hong Kong can do, and all of the things that HK has done, and you feel really, really good.  Then you leave the nice breakfast, and then go back to trying to pay your rent, and you feel miserable and hopeless again.

One thing that’s funny about these meetings is that it feels a lot like being back in a high school student council trying to figure out how to organize a car wash or bake sale, and to put together a list of complaints to the principal.  Except that the car washes and bake sales involve raising billions of dollars.

My person interest was to discuss the things that technology like cryptocurrencies and blockchain would have in developing bond markets, and also I mentioned that I’d like to develop Hong Kong has a funding center for “big science” including multi-billion dollar particle accelerators and to have HK turn into a center for aerospace technology.  I got the sense that the reaction from the other participants would have been the same if I showed up in 18th century England talking about iPhones and social media.  People didn’t react because I think it was outside the scope of people’s experience, so what I ended up doing would be what I would do if I did end up in 18th century England with iPhones, and that’s to just sit back and figure out what people are interested in talking about.

It turns out there are two basic issues.  Creating a bond market for Hong Kong dollar products, and also developing Hong Kong as a bond trading center.

People disagreed about how important the first thing was.  It turns out that the main use for HK Dollar bonds would be to connect retirement savings from the MPF with various construction projects.  The trouble with HKD assets is that they have very low yield which means it is more attractive to take USD assets.  It’s also a small market, and I think there was some disagreement about how important it was to develop this market.

When it came to bond issuance, it turns out that there was a lot of demand in the market from “green bonds” (i.e. bonds to fund environment projects) and Islamic bonds (i.e. bonds that are compliant with Sharia).  There was some discussion on the proper role of HK government in doing green bonds, and one person mentioned that Singapore was going heavily into developing markets for green bonds.  There was another person that said that the current interest in green bonds started with China.  China’s environment is a mess, so Xi Jinping ordered people to “do something about it”.  That went down to the People’s Bank of China, who just put together a market for “green bonds”.

One person mentioned that all of the new public housing that the Housing Authority will put in will be “green” and if you set up something so that those bonds are issued separately, that you’d automatically have “green bonds.”  One person asked what makes a “green bond” special, and the answer is from a bond trading point of view, nothing.  It’s just that the “green bonds” have are used to fund projects that have been certified as green, and all of those certifications are pretty well established.

I brought up the fact that when we are talking about long dated bonds, what happens in 2047 starts becoming an issue.  Someone asked what would happen in 2047, and I said (and I think most people seemed to agree) that “nothing will happen.”  One person mentioned that he has talked to people that were worried about 2047 because they were under the impression that the HK dollar might disappear then.  What I said was that I think this was a public relations issue, since as far as I was concerned, it’s more likely that the Hong Kong Dollar will exist in 2050  than the Euro will.  A few people (including me) seemed to be of the opinion that it’s better not to focus too much on 2047, because the more people reassure people that nothing bad will happen, the more nervous people will become.

Some one mentioned that China is rapidly going to be the world’s largest bond market, and that HK is going to be important because HK has an pretty open regulatory and strong judicial system.  He mentioned that there were regulators in the room participating in the discussions, and that this sort of thing doesn’t happen in the Mainland or even the United States.

There seemed to be agreement that technology was important, and that the bond markets were ancient and that HK needs to push new technology.  Also, there seemed to be a consensus that the job of the HK government was to regulate and issue rules but not to lead in changing the bond market.  That led me to ask a question, so if it’s not the role of the HK government to lead, then who is going to drive all of the technology innovation that is going to make all of this work.  I don’t think anyone answered the question, but I was thinking to myself “good grief, I guess its going to be me since no one else is going to do it.

 

Welcome to the new normal

One of the cool things about markets and ecosystems is that weird things happen.  You see systems self-organize and act in bizarre ways.  It’s like watching snowflakes form.

A few weeks ago Bitfinex got their correspondent bank accounts shut down by Wells-Fargo, but I think that this was just the tip of the iceberg.  Looking at how the network has behaved, it’s pretty reasonable to assume that all of the exchanges got their international bank wires shut down by all of the major international banks.

What’s been fascinating to me is how the network has reacted.  One of the first things that happen is what I call the “Dunkirk scenario”.  You have a bunch of gold stuck of the beach, and then it becomes highly profitable to move that gold off the beach, and once people figure out out, everyone goes and opens up bank accounts and creates alternative ways of moving money, and you now have a decentralized system for moving funds that turns out to be difficult for an international bank to block.

Also the fact that bitcoin has been cut off from the international settlement system has really started to stress the bitcoin network.

There are two aspects of this.  The first is how local everything becomes.  It turns out that I’m making decent amounts of money moving funds from bitcoin exchanges with bank accounts in Taiwan.  It took me about two weeks to get everything set up in Taiwan, and it turns out to be rather annoying to do so if you don’t have local knowledge.  How this works became obvious when I was told that you can make similar amounts of money arb’ing bitcoin through Korea and Japan.  I took a look at how to do it, and it turns out that I’m likely to stick with Taiwan since I can read and speak Mandarin Chinese, but I don’t know a word of Korean or Japanese.  If you could make 25% from the arb, I’d learn Korean, but the arb looks like 5%, which turns out to be just enough for me to let someone in Korea do the money transfer.  Funny how the numbers work out that way.

The second is what seems to be happening with the network.  It turns out that the bitcoin prices are huge at the edges.  I trade bitcoin in Vietnam and it turns out that you can make a huge amount of money converting bitcoin to Vietnamese Dong for end users.  This would be great if I happen to be a user of Vietnamese currency, but I’m not.  I’ve been told that the same thing is happening in Latin America, Japan, Korea, and Mainland China.  You can make a decent amount of money if you can move bitcoin to those areas, just like you can make a decent amount of money if you can move shoes, hammers, and rubber duckies to Mexico.

That’s the edges of the network.  What’s really cool about where I’m setting in Hong Kong is that I’m setting near the middle of the network, and the core of the system is Russia<->China.  What is interesting about the way that money works in Russia, is that in the 1990’s, the Soviet system completely collapsed, and so Russia had to create an ad-hoc system for doing business, and this system is largely disconnected from the international banking system.  So when Russians buy goods internationally, they’ve never used the banking system.  China went in a different direction.  The Communist system didn’t collapse, but the challenge has been to try to connect the Chinese system with the global financial system.  So what you end up with is something that’s really weird, and something that happens to flow through Hong Kong.

So you have these two new economic systems that need to do international trade, and it turns out that bitcoin is absolutely perfect.  So you have Russians that want imported goods from the rest of the world, they have a huge amount of dollars which they want to sell in order to get those products, and that pushes down the price of bitcoin on Btc-E and bitstamp.

One final thing is that for the past few years, people have been talking about speeding up the bitcoin network, and those talks have gone nowhere.  Right now the network is being stressed, and rather than having a lot of meetings, the network is encouraging people to act in certain ways which is creating a wholesale-retail network.

If all of this is happening, it’s really good for me.  I used to work at an investment bank and I sat right next to trading desks where tens of billions of dollars were being moved delay.  If you want to see what tens of billions of dollars sound like, just imagine phones ringing, and displays on a computer screens (and the senior traders had computer screens that had nine computer monitors connected in a wall).  The image that I always had was of a giant waterfall, and if you are sitting next to Niagara Falls, you are going to get wet.

The problem now is that I’m no longer sitting next to Niagara Falls, but they’ve blocked enough of the falls so that some of the water just happens to be moving next to where I am.  It’s not enough to get me wet by just standing here, but I can dip my cup in and get enough so that I don’t die of thrist.

One reason that I think I’m in the right place, is that everyone that I’ve talked to in traditional banking has been pessimistic about the future and pessimistic about Hong Kong.  It turns out that Hong Kong happens to be exactly the right place to be at the center of the network.

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