Why Digital Assets are like Sushi

Last Monday, the Securities and Exchange Commission (SEC) approved the first ethereum exchange traded funds (ETFs), marking another large win for cryptocurrency enthusiasts following the debut of bitcoin ETFs which were approved by the agency back in January. The mere sound of the word ‘crypto’ still frightens and confuses many investors, instantly conjuring up tales of scams, ponzi schemes, legal battles and get rich quick adverts. Indeed to this day, the majority of mainstream coverage of digital assets typically is focused on the above, in crypto-land, you are either a hero or a zero, all this despite the fact that the asset class has been popular for quite some time.

Despite the media coverage and fears associated with it, many of which are well-intentioned, digital assets continue to grow in prominence and popularity. This is illustrated by a recent study of global institutional investors which found that 60% were familiar with the asset class, 51% were invested in it, with one in seven admitting they are likely to increase their allocation towards it in the next two to three years. This demonstrates the tide and attitude towards digital finance is definitely shifting.

The big question for those in the industry who are trying to bridge this gap is how exactly do they do it? Enter the California Roll (stay with me here). Before I explain just how digital assets are like raw fish, I must admit this idea came from the mind of our Strategy Director Dan Perry, who stumbled upon it by reading work by behavioural psychologist Nir Eyal so all credit to both of them for this.

In the 1970s, Japanese restaurant owners in the states were struggling to entice diners into their restaurants. Raw fish was not part of the established American diet and the cuisine was just altogether alien. But by swapping the unfamiliar raw fish, tofu and seaweed for more familiar ingredients like avocado and crab they provided a gateway to sushi in the form of the California Roll. Making the unfamiliar familiar, and therefore more palatable.

The blending of the familiar with the unfamiliar is a proven method for encouraging the widespread adoption of new products, the key issue at hand here. This therefore, can be applied to the world of finance, in the form of unfamiliar assets in familiar wrappers e.g. Bitcoin ETF or familiar assets in unfamiliar wrappers e.g. Tokenised gold. The initiative therefore lies with those established traditional finance businesses that are able to market their digital asset capabilities as an evolution of those products we all know and love rather than a revolution. This should encourage wider spread adoption and, in time, more positive media coverage and better public opinion.

Sources:

Fidelity Digital Assets Research: Institutional Investor survey - Survey of institutional investors by Fidelity https://www.nirandfar.com/california-role-rule/ - Original California Roll story by Nir Eyal https://www.ft.com/content/f36d7eeb-03d6-4dab-909a-d5d4524a4edb - FT article on the approval of Ethereum ETFs