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by Danny Bradbury, May 03, 2018

Traditional Financial Companies Warm to Cryptocurrency


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Financial firms are becoming more positive about the prospect of blockchain-based cryptocurrency trading, with one in five planning to test the waters in the next year, according to a survey by Thomson Reuters as reported by Business Insider.

The data and news agency asked 400 of its clients, ranging from hedge funds to large asset managers and bank trading desks, about their cryptocurrency plans. It found that 20 percent of them were considering trading in cryptocurrency over the next 12 months. Of those companies, the majority said that they would begin sooner rather than later, in a 3- to 6-month period.

There are already some positive signs that cryptocurrency trading is maturing as notable players enter the market or hint at possible plans. Last month, Canadian exchange company TMX Group, which owns the Toronto Stock Exchange, entered the market.

TMX announced the Shorcan Digital Currency Network (Shorcan DCN), a cryptocurrency brokerage that will provide over-the-counter Bitcoin and Ethereum trading services combined with consolidated market data. Its partner in the deal will be decentralized financial services company Paycase Financial Corp., which offers a mobile remittance platform. BMO Financial Group, one of the “big five” Canadian banks, will provide banking services for the brokerage.

Other significant financial players have recently shown interest in supporting cryptocurrency trading. In a CNBC interview on April 25, Nasdaq CEO Adena Friedman said that the exchange would consider launching a cryptocurrency exchange in the future.

Friedman’s comments came as the company signed a deal to provide the Winkelvoss twins’ Gemini cryptocurrency exchange with its SMARTS Market Surveillance technology to monitor trades and detect fraud.

Nasdaq’s positive comments on cryptocurrency in April are not its first. Friedman has gone on the record in the past confirming that the exchange is looking at launching cryptocurrency futures contracts, joining existing derivatives from Cboe and CME, although she has said that the company would take a different approach to structuring its cryptocurrency futures. Officials at the exchange have hinted at a launch this year.

Other big players have also signaled interest. Goldman Sachs has appointed former Merrill Lynch Vice President Justin Schmidt as head of digital asset markets, following reports that it plans to launch a crypto trading desk.

Reflecting the positive regulatory stance on cryptocurrency in Japan, Mitsubishi UFJ Financial Group, one of the world’s largest banks, is also reportedly planning to launch a cryptocurrency exchange. It will also support cryptocurrency traders with MUFJ Trust, a service that links accounts to exchanges while keeping the traders’ money under their own control. Finally, it is planning its own cryptocurrency, MUFG Coin, to help provide a stable transaction mechanism.

The Moscow Stock Exchange has also said that it would like to trade cryptocurrency derivatives if regulations allowed it, although the Central Bank of Russia is reportedly putting the brakes on cryptocurrency trading.

Banks and exchanges are not the only financial companies warming to cryptocurrency. Some large investors are also preparing to get involved. The family office for billionaire investor George Soros recently gained approval to trade in cryptocurrencies, although the office hadn’t yet executed on it as of early April.

Some respected players are busy creating the tools for these financial companies to make ventures in this space. In January the Intercontinental Exchange (ICE), which owns the New York Stock Exchange, launched its Cryptocurrency Data Feed (CDF), aggregating data from 15 cryptocurrency exchanges. The CDF, which covers seven currencies including ether, bitcoin, dash and ripple, will serve hedge funds and banks, ICE said.

As momentum picks up in the traditional finance sector, some naysayers have backtracked on previous statements about Bitcoin. JPMorgan CEO Jamie Dimon said in January that he regretted calling Bitcoin a fraud, although he still has little interest in the cryptocurrency and worries about government regulation.

If large financial institutions venture into the cryptocurrency market, it could boost trading volumes and lift prices by creating more legitimacy in the broader financial markets.