- Deutsche Bank has applied to offer a crypto custody service.
- Citadel Securities, Charles Schwab and Fidelity-backed EDX Markets went live today.
- The move comes after BlackRock applied for a Bitcoin ETF in the US. It’s a sign that more is to come.
Deutsche Bank is the latest traditional finance giant to wade into crypto. It’s yet another sign that traditional finance firms are piling into the industry as native firms falter amid scandals and lawsuits.
The German bank is building out its digital assets and custody business, global head of corporate banking, David Lynne, said at a conference today.
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Lynne’s announcement came as EDX Markets, a crypto exchange backed by Citadel Securities, Charles Schwab and Fidelity, went live – nearly a year after the venture was announced.
The developments follow BlackRock, the world’s largest asset manager, which this week applied for a spot Bitcoin exchange-traded fund in the US. The surprise application buoyed the market.
Institutional buy-in to crypto markets has been slow amid bankruptcies and US a regulatory crackdown. But more financial firms could follow, according to Paul Howard, former Goldman Sachs banker and head of sales at Standard Chartered’s Zodia.
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“The reality is, many are holding off,” he told DL News. “They are conservative in nature so they haven’t put their toes in the water.”
But that may change, and fast. Fidelity is ramping up its army of 500-plus employees in its digital assets division. Jump Trading, Jane Street, and Tower Research Capital are among the US trading giants forging a path in crypto.
Galaxy CIO Chris Ferraro said earlier this year that he has seen crypto divisions pop up at “every bank, at every custodian, every broker-dealer” along with “big asset management firms investing in the next step.”
Crypto markets are perfect for sophisticated traders: rocky prices mixed with relatively uninformed hordes of retail investors who don’t have the super-fast computers that big hedge funds and banks do.
Some companies have said they’ve seen an uptick in institutional activity as crypto-native firms struggle — as clients seek what Fidelity called “a flight to quality.”
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“Crypto is in its infancy. You might see one firm put down $50 million or something,” Sameer Shalaby, president of digital asset trading, financing, and lending platform VersiFi told DL News last month. “That’s nothing when you’re managing $100 billion.”
BlackRock already offers two blockchain-focused exchange-traded products in Europe.
The $9 trillion dollar firm offering several crypto exchange-traded products shouldn’t necessarily be taken as a vote of confidence.
Deutsche’s Asian subsidiary DWS has plans to launch crypto ETPs in partnership with Galaxy Digital.
Deutsche Bank isn’t even among the first to move into crypto in Germany. In March, Boerse Stuttgart was licensed by BaFin — the German securities regulator — to offer crypto custody services.
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BNY Mellon joined the crypto custody party before that, announcing its own platform in October.
CEO Robin Vince said ignoring crypto would be comparable to “being the custodian of 50 years ago and sticking with paper and not adopting a computer,” during the bank’s fourth-quarter earnings call in January.
Vince went on to call it the bank’s longest-term play, emphasising how institutions of this size will move slowly.
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EDX Markets, which closed a new funding round, welcomed investors such as quant trading firm Hudson River Trading and market maker GTS. The exchange aims to bring the best of traditional finance to crypto markets, CEO Jamil Nazarali said today.
EDX plans to launch a clearing platform, EDX Clearing, from the end of the year to settle trades matched on EDX Markets.
“EDX Clearing will be a major differentiator for EDX,” Nazarali said, adding that it will “resolve an unmet need in the market — by enhancing competition and creating unparalleled operational efficiency through a single settlement process.”