Stephen Browne | Paul Comstock Partners
A skeptical viewpoint on cryptocurrencies and blockchain
Steve Browne is a Director, the CIO & CCO at Paul Comstock Partners; an outsourced Chief Investment Officer (CIO) serving family groups and institutions. Steve’s responsibilities include the supervision of the research staff in all areas of investment strategic planning, delegated manager evaluation and performance monitoring, asset allocation strategies, capital market analysis, and all private equity and real estate due diligence efforts. We recently sat down with Steve, who will be speaking at our Digital Asset Strategies Summit (Oct. 16 – 17 – Dallas), as he provided a different viewpoint about cryptocurrencies and blockchain.
Digital Asset Strategies Summit: As someone who is not a proponent of crypto, where should today’s investors be allocating risk capital?
Steve Browne: Most investors are best served by a disciplined, strategic asset allocation. At the margin, defensive allocations make sense given that it is late cycle. Relatively attractive areas currently include non-US stocks, midstream infrastructure and low duration institutional preferreds.
Digital Asset Strategies Summit: Are you bearish on blockchain, the technology that underpins cryptocurrency?
Steve Browne: Blockchain currently is an economically unproven technology. My concern is that a broad swath of the investment community uncritically accepts the rather breathless pronouncements of promoters (just Google ‘blockchain is bigger than the Internet’ to find examples). To date, the only successful deployments of blockchain technology has been cryptocurrencies, which have been driven by the dynamics of a speculative bubble. Blockchain is not a free lunch. A centralized, administered database (like Visa) will always be more computationally (and therefore energy efficient) than a distributed ledger. The key then, is whether the costs of the centralized database (security risks and corporate rent-seeking) offset the inherently higher computational costs of a blockchain solution. In a decentralized network providers of computational power (i.e. miners) have to be compensated. The issue is whether the all-in costs of a blockchain solution offer a significant advantage over a centralized database.
Digital Asset Strategies Summit: Can one be bullish on blockchain technology yet bearish on cryptocurrencies?
Steve Browne: The argument is frequently made that one cannot, but I suppose it is possible if one views blockchain as a limited technology with a few niche applications.
Digital Asset Strategies Summit: Would your stance on crypto change as the regulatory regime matures?
Steve Browne: Recent trends in the regulatory regime have not been favorable to crypto.
Digital Asset Strategies Summit: Can you ever envision a future where crypto becomes part of a recommended asset allocation strategy?
Steve Browne: If the future the crypto proponents believe in comes about, then yes. But currently crypto is not an investible asset for a fiduciary.
Digital Asset Strategies Summit: Thanks Steve. We look forward to hearing more of your thoughts at the Digital Asset Strategies Summit October 16 – 17 in Dallas.