New CME Bitcoin Futures And The Goldman Sachs Connection
Embedded into Bincoin’s genesis block by Satoshi Nakamoto on January 3, 2009, the day Bitcoin went live, was a message which is now well-known throughout the Bitcoin community. This message, taken from The Times newspaper of that day, read “Chancellor on brink of second bailout for banks”.
While there is ongoing debate as to its significance, the message was arguably a commentary on Satoshi’s less than favorable regard for the parasitic, unstable and inflationary nature of the contemporary banking system, as well as a statement on Bitcoin being able to provide a more equitable transfer system by cutting financial institutions out of the equation.
Elsewhere, Satoshi had elaborated on banks, again is a less than flattering way:
“Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.”
We can therefore conclude that the Bitcoin creator does not have a high opinion of banks in general, which probably also explains why Satoshi created Bitcoin in the first place, and why Satoshi’s white paper about Bitcoin was first published on a cypherpunks mailing list, and not, for example, within the pages of a Bank for International Settlements (BIS) research report.
Which is why it would be intriguing at this time to know what Satoshi thinks of the imminent launch of (US dollar cash-settled) Bitcoin futures by the CME Group. But even more interestingly, it would be intriguing to know what Satoshi would think of the fact that the settlement prices of these new CME Bitcoin futures are based on calculations by a private London-based company whose founder and sole director is from Goldman Sachs.
As a reminder, this is the same Goldman Sachs which Matt Taibbi described as follows, coincidentally also in 2009:
“The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
This is also the same Goldman Sachs, whose alumni currently occupy positions in the most powerful financial positions in the world, positions such as US Secretary of the Treasury (Steven Mnuchin), President of the European Central Bank (Mario Draghi), Governor of the Bank of England (Mark Carney), and President of the Federal Reserve Bank of New York (Bill Dudley).
The Fix is In: CME Bitcoin Futures
One key feature that stands out when glancing at the contract specs of these soon to be launched CME Bitcoin futures contracts is that they will be cash-settled based on a “CME CF Bitcoin Reference Rate (BRR)”
A recent CME press release elaborates:
“CME Group’s Bitcoin futures will be cash-settled, based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin.
Since November 2016, CME Group and Crypto Facilities Ltd. have calculated and published the BRR, which aggregates the trade flow of major bitcoin spot exchanges during a calculation window into the U.S. Dollar price of one bitcoin as of 4:00 p.m. London time.
The BRR is designed around the IOSCO Principles for Financial Benchmarks.
Bitstamp, GDAX, itBit and Kraken are the constituent exchanges that currently contribute the pricing data for calculating the BRR.”
A reference rate / benchmark calculated in the City of London that is used as a basis for the settlement of multi-billion dollar financial contracts. Wait, where have we heard that before?
The CME web site also helpfully hosts a methodology document for this Bitcoin Reference Rate (BRR), but which strangely has very little mention of CME, and a lot of citations to Crypto Facilities Ltd.
The document is even titled “Crypto Facilities – Digital Assets Unleashed” (dated March 6, 2017) and also copyrighted by Crypto Facilities Ltd. “© 2015 – 2017 CRYPTO FACILITIES LTD. ALL RIGHTS RESERVED. PATENT PENDING.”
In this methodology document, both the Administrator and Calculation Agent of the BRR are exclusively listed as “Crypto Facilities Ltd”, based at an address in the City of London:
Contact Details: Crypto Facilities Ltd 4th Floor 25 Copthall Avenue London EC2R 7BP
So who or what is “Crypto facilities Ltd”? Looking at the UK Companies registration web site (Companies House), reveals that ‘Crypto Facilities Ltd’ was incorporated on 12 August 2014 as a private limited company in the UK.
According to Companies House, ‘Crypto Facilities Ltd’ only has one director, a certain Timo Schlaefer.
Who is this Timo Schlaefer? According to LinkedIn, Timo Schlaefer was with
the Vampire Squid Goldman Sachs between 2011 to 2015. Strangely though, the header of Schlaefer’s LinkedIn profile still says “Goldman Sachs”.
LinkedIn screenshot https://uk.linkedin.com/in/timoschlaefer/en
Then there is a Bitcoin Magazine article about Schlaefer dated February 2015 which describes him as “Executive Director in Credit Quantitative Modelling at Goldman Sachs.”
In summary, here we have a new Bitcoin futures contract, a derivative on the global phenomenon that is Bitcoin, whose settlement price is based on a reference rate calculated in London by an unknown company whose sole director is from Goldman Sachs.
But there is nothing to worry about, because CME also confirms that there is an Oversight Committee for this Bitcoin Reference Rate calculation. This committee has the impressive title of the “Bitcoin Pricing Products Oversight Committee”, and the Committee:
“has been established jointly by Crypto Facilities Ltd. (“CF”) and Chicago Mercantile Exchange Inc. (“CME”).
The initial members of the Oversight Committee and its Chairman shall be appointed jointly by CF and CME”
While we will leave you to ponder what all of this means, its difficult to imagine that US dollar cash-settled CME Bitcoin Futures were on Satoshi’s radar when he typed “Chancellor on brink of second bailout for banks” into his computer on January 3, 2009, hitting the enter key and kicking off Bitcoin’s genesis block and the creation of a new global system for disintermediating banks and sparking the emergence of an entire new universe of crypto currencies and blockchain platforms.