Social Trading Further Catalyzes the Convergence of Financial Regulation & Technology

Social Trading is really just the utilization of user-generated content as trade signals and wisdom-of-the-crowd to make online investment trades. Social trading sites usually provide their users with a suite of community-based tools in order to give them the info needed for making smarter trading and investment decisions. This became a big problem when Retail Brokerages and Social Trading providers were compensating “lead traders” for bringing in new deposit revenue. Lead traders would then incentive amateur traders (Copy Traders), usually in developing market jurisdictions, to bring in new deposit revenue for the usually “B-book Broker.”

The Brokers would then use a profit-loss model to split the loss between participating stakeholders — the FCA’s goal is to stop this type of conflict of interest and scams from happening. This problem causes MiFID II to focus heavily on defining the details around portfolio management regulations. When it comes to portfolio management and copy trading, the FCA states that portfolio management is active when trades are being made on behalf of the Investor/Client without need for their intervention — automatic trades triggered based on trade signals…sound like the perfect use case for Blockchain Tech and Smart Contracts.

Investors can set how much they are willing to lose in portfolio management, but it stops being portfolio management “where no automatic order execution occurs because client action is required before executing each transaction.[Citation]”

The Ponzi schemes described in the FinanceFeeds article occurred as a result of technological advancements accompanied by a lack of government regulation. However, just relying on governments to watch out for the “little guy” across the globe is nearly impossible without some type of joint effort — specially when this activity is happening in undeveloped economies.

Ernst & Young on MiFID II

The most well-known of the Big 4 Accounting Firms, Ernst & Young (EY), describes the implications of the FCA’s MiFID II In a 20-page report on the topic:

MiFID II represents one of the centerpieces of financial markets reform and it is far from an incremental change. As a result of the expanded asset class coverage, structural market reform and its applicability for firms previously exempted, MiFID II will dramatically change almost the entire marketplace as we know it today, with far-reaching impacts on everyone engaged in the dealing and the processing of financial instruments. We expect no business or operating model — especially in the over-the-counter (OTC) space — to remain untouched.

Woah. This is coming from THE industry leaders on financial reporting compliance; however, because this is traditional financial regulatory policy, you’re not hearing about this on your Tele. It has taken something as sexy as cryptocurrency and blockchain technology to get this info in front of you! EY is telling you and I that the entire markets are going to change because of these financial regulatory changes.

The FinanceFeed article also explains that the greedy Social Trading platform operators ultimately killed Social Trading because they were missing three tenets that describe today’s retail traders:

“self-empowerment; enlightenment and understanding; and the basis of the demands placed upon retail FX brokerages in the major and well respected jurisdictions of North America, Britain, the Far East and Australia these days revolve around requirements from direct retail traders, not, as was once the case, the dictation of services by the broker to the client.”

Luckily for #1 and #2, Genesis Vision is constructing their platform in a way that empowers Asset Managers to have more choices and abilities while making asset management as easy as possible. For #3, well, their entire business model is built on reducing the regulatory demands of Brokerages while simultaniously creating more transparency.

Genesis Vision — Aligning Regulation & Technology

Genesis Vision aims to create a system that utilizes Smart Contracts, built on the Ethereum Blockchain, to automate specific processes within their overarching Assets Under Management (AUM) platform. The best part about the Genesis Vision business model is that the very important financial data, required to be stored for years, is built on the Ethereum Blockchain, making it immutable and unchangeable by anybody…not even a foreign government regulatory body.

Across the globe and especially in the United States, reporting every move of the Dollar in each account is not required. This lack of transparency allows for investors’ funds to be taken advantage of by dishonest Asset Managers, Brokers, and/or Exchanges — a cloudy situation to say the least.

Today, there is no doubt the technology exists to create a solution to these issues. Considering entrepreneurship and finance are the underlying essential drivers to any economy; the global economy depends on humanity to work together and get this right, the first time.

Looking below, we can see examples of how the Genesis Vision leadership team will implement their smart contracts into specific business model processes. Every process controlled by a corrupt-able human can be automated by utilizing Smart Contracts:

Smart Contracts allow for these important processes to remain transparent — profit distributions; issuance and management of Manager Coins; triggering of reporting requirement data and the others shown above. The solution would really only require for Genesis Vision to cooperate with the FCA on further developing this major, global solution.

Investors: GVT Value

You might be wondering, “what increases the value of GVT?” Well, Genesis Vision Token is the internal currency for the overarching GV ecosystem and has a set supply. The first major way demand for the GVT increases is when Investor deposit volume is up — new money. This new money is used to purchase Manager Tokens which entitle the Investor to profits from that Manager’s Fund. Secondly, when Managers are profitable with Investor funds, the GVT is required to payout the profits Investors are entitled to. Third, GVT will be a speculation instrument — meaning, you can profit by trading it at a higher price than you purchased it for. This is important because in the volatile cryptocurrency markets, we actually do experience crazy 100x returns overnight; unlike a more stable asset class like real estate.

Considering the AUM market is currently $71 TRILLION and expected to reach over $100 TRILLION by 2020 (PricewaterhouseCoopers), this could mean some big, big new money flowing into the GV ecosystem and, in turn, building demand for the GVT. Putting this in perspective — the entire cryptocurrency market, right now, is sitting at $170 BILLION…about .24% of the entire AUM market. Wow.

1% of $71 TRILLION is $710,000,000,000, about 4x where we currently sit. To demonstrate the tidal wave of demand that could be created for the $1 GVT, I’ll use the currently $5,668 Bitcoin as an example.

Self-made Example

Notice what happens to the price of Bitcoin as it maintains market share dominance when the overall cryptocurrency market cap is $1 Trillion? Conceptually, Genesis Vision is on-point. The GV leadership team has been taking on strategic advisers including most recently Changelly’s CEO and Founder, Konstantin Gladych and Co-founder to the Bitcoin Foundation, Jaxx.io Business Development Officer, and well-known Bitcoin pioneer, Charlie Shrem.

To wrap this up, technology and human-greed led to the creation of “Social Trading” which created a more favorable environment for human-greed to take over, Ponzi Schemes. This caused the most developed financially regulated country, The United Kingdom, to step up as a global regulatory body with the FCA and further define facets of Portfolio Management compliance. Together, with new FCA regulations, Genesis Vision can act as the “glue” between all stakeholders involved across all Asset Management markets.

I hope this article acts as a catalyst for you to dig a bit deeper into what Genesis Vision is working on; much as the greedy scammers acted as a catalyst to the UK’s FCA gaining the opportunity to step up as a global regulatory body for the Assets Under Management market!

Below are articles I have written about Genesis Vision after researching their White Paper and underlying topics involved in their industry throughout their Initial Coin Offering: