There is a noticeable shift in the financial industry’s approach to cryptocurrencies. Industry leaders once seemed to view digital currencies with skepticism, keeping the currencies at arm’s length despite the rise in value and popularity.
One of the industry’s leading voices, Jamie Dimon, once famously described Bitcoin as a “fraud,” and other institutions acted like it was. Since then, the circumstances have changed.
In December, Cboe and CME Group – two Chicago-based commodity exchanges – were the first mainstream financial institutions to offer Bitcoin futures. The products stumbled at first, but Bitcoin futures have become significantly more popular in recent months. Other companies have followed their lead.
In May, Intercontinental Exchange – the parent company of the New York Stock Exchange – revealed that it is developing a crypto trading product that would allow investors to purchase Bitcoin directly. Meanwhile, Goldman Sachs announced that it also plans to offer Bitcoin Futures to its customers.
Now, a trading firm with significant stature, Susquehanna International Group (SIG), is entering the market as well.
Another Big Player Enters the Market
SIG’s interest in cryptocurrency began in 2015 when the creators of Gemini – Tyler and Cameron Winklevoss – introduced the company to digital currencies. According to The New York Times, the brothers pitched SIG on joining their Bitcoin ETF, which had an outstanding application with federal regulators.
Although the application was ultimately denied and the partnership never commenced, SIG retained a single crypto trader, allowing the company’s latest venture to bloom.
SIG’s recent initiative was inspired by the success of Bitcoin futures contracts, and the company has decided to begin offering their clients access to crypto markets.
The company’s cryptocurrency desk will provide clients access to Bitcoin, Bitcoin futures, Ethereum and Bitcoin Cash, which includes three of the top four most valuable digital currencies by market cap.
SIG attained a broker-dealer license to legally trade cryptocurrencies that are designated as securities. Bitcoin is not classified as a security, but the SEC continually makes it clear that it sees most other cryptocurrencies as securities that should be regulated.
Initially, SIG’s cryptocurrency operation will be available to a fraction of the company’s 500 clients, and there is an expectation that the offerings will expand over time.
SIG expects that cryptocurrencies will have a lasting impact on the financial industry. As Bart Smith, head of SIG’s digital asset group, recently told the Times:
“We believe that this technology and this asset class is going to change some facet of financial services, and we think it is going to exist forever.”
While SIG is bullish on Bitcoin’s role in the financial system, the company acknowledges some of the industry’s shortcomings. Federal investigators are looking into possible price manipulation on unregulated cryptocurrency exchanges and many crypto exchanges‘ difficulties protecting their funds from hackers.
SIG’s biggest concern is security. To combat exchange-based currency theft, the company has developed its currency storage system for any cryptocurrency held for more than a day. As an extra level of protection, the system’s private keys are stored in an off-site location.
A Sign of a Shift
After years of doubt, Wall Street finally appears ready to embrace cryptocurrencies.
More than 200 participants already turned their attention to crypto in the form of crypto-focused hedge funds, and financial institutions are getting involved as well.
Susquehanna International Group is the first firm of its stature and with its resources to provide such diverse crypto products to its customers.
Therefore, in the Times, Nathaniel Popper writes:
“The move is the latest sign that the virtual currency markets, which were once relegated to the fringes of the financial world, are being embraced by big, mainstream investors.”
For these companies, there is no blueprint to follow. Essentially, each company is creating its roadmap in conjunction with the desires and demands of their clients. These companies will present a diverse offering for consumers as they continue to increase.
We still don’t know the impact that these product offerings will have on crypto markets, so it’s worth following their development, implementation, and popularity – these products are sure to be an evolving force for the crypto ecosystem.
Cover Photo by @mazhxri on Unsplash