Bitcoin purchases by central banks and sovereign funds is inevitable, Tyler Winklevoss says

Purchases of Bitcoin by central banks and sovereign funds are inevitable as the adoption of cryptocurrencies is growing, according to Gemini co-founder Tyler Winklevoss.

More companies are also more likely to hold Bitcoin on the balance sheet for treasury purposes, as it serves as a much better hedge against inflation than gold, Mr Winklevoss, a cryptocurrencies afficionado, told a webinar organised the other day by the AIM Summit and digital asset manager 3iQ.

"At some point a central bank could have Bitcoin on its balance sheet. That just will happen," Mr Winklevoss said.

"Because central banks have gold on the balance sheet. And Bitcoin is Gold 2.0," he argued.

Mr Winklevoss and his twin brother Cameron rose to fame in 2004 after suing Facebook founder Mark Zuckerberg, whom that they had employed to create a social media site, HarvardConnection. The pair alleged that he stole their idea to create Facebook and the case was settled in 2008, with the twins reportedly acquiring $65 million in cash and Facebook shares. They invested this in Bitcoin and today have a net worth of $3 billion each, according to Forbes.

The Winklevoss twins first invested in Bitcoin through the Mt Gox exchange in Japan in 2012. Mt Gox was after the world's major Bitcoin exchange handling 70 per cent of all transactions nonetheless it crashed in 2014 after hackers stole about 850,000 Bitcoin (worth $49.2bn at today's prices) from the site's customers.

Their loss spurred them into establishing Gemini, a company which offers cryptocurrency custody and exchange services that is regulated by the New York STATE DEPT. of Financial Services.

Mr Winklevoss said they wanted to build an "institutional-grade" exchange that may be used by the world's biggest money managers. However, so far only a handful of large asset managers have offered Bitcoin-related investments to clients.

Gemini has held discussions with sovereign funds, pension funds and endowment managers about buying Bitcoin, according to Mr Winklevoss.

"You'd be shocked how advanced and knowledgeable they are in the asset class," he said.

"In my opinion, it isn't an if, this is a when a sovereign wealth fund comes out and says they have Bitcoin. They may curently have it."

He expects more companies to hold Bitcoin on their balance sheet as an instrument to move money between jurisdictions and a hedge against devaluing currencies, citing the well-documented examples of Tesla and Square.

"There's about 40,000 publicly-traded companies around the world on global stock exchanges that are regulated. I think only 32 have Bitcoin on their balance sheet. That number will probably increase over time. You are going to start to see the Fortune 100, 500, 1,000 - they're all likely to have Bitcoin," Mr Winklevoss said.

The huge monetary stimulus undertaken by the US Federal Reserve and other central banks all over the world is also convincing persons who were sceptical about cryptocurrency previously to embrace it, he argued. The US federal debt-to-GDP ratio hit 135 % in the next quarter of last year at the peak of the pandemic, that was "higher than in World War II".

"There's actually a big difference, though, because in the past we had full employment and record production for the war effort. These times ... we have had record unemployment and the world's production [ground] to a halt.

"It doesn't take a rocket scientist to see what's happening in these fiat government currency regimes."

Bitcoin rose to $57,551.41 at 6.33pm UAE time on the Luxembourg-based Bitstamp exchange on Saturday. It had risen above $63,000 earlier this month, but faced a sell-off after US President Joe Biden announced plans to improve capital gains taxes. It has still increased six-fold in value in the last 12 months, with market cap of $1.08 trillion

Regulators in lots of countries have expressed concerns, though, with Turkey's government introducing a ban on using cryptocurrencies for payment. India's government is also reported to be weighing up a ban and regulators in other markets have expressed concern about Bitcoin's role in money laundering and other illicit activity.

However, 3iQ and other asset managers have developed exchange-traded funds and other regulated vehicles by which asset managers may offer their clients exposure to Bitcoin.

Earlier this month the Canadian digital asset manager said it will seek a listing on Nasdaq Dubai for The Bitcoin Fund, that includes a net asset value of $1.33bn. The business is targeting around $200m of subscriptions from investors through the Dubai listing.

"We are seeing a whole lot of banks looking to get access to crypto because of their customers. I think a lot of their customers feel overlooked," Mr Winklevoss said.

"They've seen Bitcoin is the best-performing asset of the last decade, it's on the right track to be the best-performing asset of the decade - I think Ether is neck and neck with it. But these assets have absolutely blown away the equities market, the FAANG companies - the best of the greatest." FAANG means discussing the stocks of Facebook, Amazon, Apple, Netflix and Alphabet (formerly referred to as Google)

3iQ's chairman and leader Frederick Pye said that although "the world is waiting" for pension funds and other institutions to declare their Bitcoin positions, however they are unlikely to take action.

"Some of the biggest pension funds we are talking to would come back and make us absolutely swear to secrecy if we were owning a portfolio for them because they still consider there's a tail risk in conditions of if something dramatic [happens]. Bitcoin has already established three corrections of 90 %. Nobody really wants to hear that their provincial pension plan, federal pension plan or company pension plan has an asset that's down 90 per cent," he said.