- Crypto exchange and market structure officials shared the future of crypto within the Trump administration.
- IPOs will be boosted and regulation will slow down.
- However, there are still obstacles to overcome before Wall Street takes action.
Cue optimism.
Following Donald Trump’s election victory on November 5, Bitcoin has reached numerous all-time highs, memecoins are booming, and even the despised NFTs are rising again.
As crypto investors rejoice in the “euphoria zone,” experts expect more traditional investment firms to respond to the growing market with new products and services.
BlackRock, which made a splash in January by introducing Bitcoin exchange-traded funds, wasted no time.
This week, the Wall Street giant offered options on these ETFs and they are off to a flying start.
And the market action is just beginning.
That was the takeaway from an event last week co-hosted by DL News and Eterna Partners.
Chris Tyrer, Head of Global Bullish Strategy, spoke on the panel; Thomas Restout, CEO of crypto market maker B2C2; and Arnab Sen, CEO of institutional crypto derivatives trading platform GFO-X.
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These market experts shared their views on the future of big banks and asset managers.
More Crypto IPOs
Cryptocurrency exchanges and other businesses that primarily serve retail customers are hoping for responsive regulation from a more cryptocurrency-friendly Congress.
This will give these companies their own means of registering with regulators and less onerous compliance once registered.
But companies that serve institutions are less concerned about regulation: they are already registered with regulators.
They have to be, otherwise the banks won’t touch them.
Tyrer said he was more interested in whether a crypto-friendly Securities and Exchange Commission would pave the way for more digital asset companies to go public.
SEC Chairman Gary Gensler’s tough stance on crypto amounts to a de facto ban on crypto companies attempting IPOs, Tyrer said.
This means that Coinbase, the cryptocurrency exchange, is one of the few major US companies to be listed.
“Coinbase is a great company, but it has had an unfair advantage,” Tyrer said.
Until now.
Tyrer’s company, Bullish, backed by Peter Thiel, is among several companies — including Circle, eToro and Galaxy — that have been unable to gain SEC approval to go public.
Tyrer agrees that clearer regulation is desirable, “but access to public procurement will help the industry to a much greater extent than what we’ve seen,” he said, adding that it would mostly give more of choice for professional investors.
A slower application
For Restout, regulation was also of secondary importance. For a relatively small company like his, the bottom line is for the SEC to reverse its aggressive enforcement program.
Under Gensler, the agency has sought to force crypto companies large and small to comply with 95-year-old securities laws that govern stocks and bonds.
While a giant like BlackRock can overcome regulatory hurdles, smaller companies must deal with the risks and costs associated with compliance.
Even companies like B2C2 need to be wary.
“So for us, as participants in this ecosystem, this is a real major shift. A lot of the larger institutions, the ones that wanted to get into this space, were able to find all the solutions,” Restout said.
Market Plumbing
Sen said that while large institutions are showing interest in digital assets and crypto, the business infrastructure is not there yet.
Much of what’s missing is the plumbing of the markets: the back-office functions that process transactions and mitigate risk behind the scenes in the capital markets.
Large banks, which provide the services investment firms need to trade any asset class, will not move into crypto until these components are in place.
But banks move slowly and their technology is outdated, Sen said.
“Banks are not going to change all of their existing technology systems for one asset class, and for an asset class that is tiny,” he said.
Banks must show regulators that they are monitoring transactions for fraud or market abuse, and they must report transactions to regulators and know who they are trading with.
“It’s not sexy, but it’s a huge friction for this asset class and for institutional participation,” Sen said.
“Regardless of the size and scale of institutions that want to trade, they want to go through banks,” he said.
Size, technology
“If you can’t integrate crypto into your existing collateral agreements and trading agreements… you’re going to have unique, smaller entities trading at a smaller size.
For banks, it’s about “technology, systems, market structure, ‘who am I facing from a credit perspective?’ “, Sen said.
Still, crypto is more than mature enough for big players, Tyrer said.
In the $3.3 trillion asset class, Bitcoin just surpassed silver in total market value, he said.
“Bitcoin has been around for almost 15 years now, it has never been hacked. And we’re still wondering if this technology is ready,” Tyrer said.
“At what point does this mindset change? At this point, it’s just people no longer looking at the facts.
Contact the author at joanna@dlnews.com.
