Some of the big names in the financial industry are making new bets on cryptocurrencies, adding competition and momentum to an emerging industry under increasing pressure from U.S. regulators.
BlackRock (BLK), the world’s largest asset manager, wants to launch a new exchange-traded fund that uses Bitcoin as an underlying asset.
Two other major asset managers, Fidelity Investments and Charles Schwab (SCHW), are backing a new cryptocurrency exchange with Citadel Securities.
And Deutsche Bank, one of the world’s largest financial institutions, wants to run a cryptocurrency custody business that stores digital assets for its customers.
These endorsements from Wall Street’s proven institutions have helped boost the value of cryptocurrencies, especially Bitcoin (BTC-USD).
The world’s largest cryptocurrency surpassed $30,000 for the first time since April and climbed to a one-year high of $31,389 on Friday. By Friday, Bitcoin was up 81% year-to-date.
Other cryptocurrencies also surged this week, including Ether (ETH-USD) and Avalanche’s AVAX (AVAX-USD) token.
The market capitalization of crypto assets reached $1.2 trillion on Friday, up 14% from the level a week ago.
This renewed interest from mainstream financial institutions comes at a time of heightened crisis for an industry struggling to regain a foothold following the 2022 collapse of crypto exchange FTX and subsequent regulatory crackdown. brought to
Earlier this month, the U.S. Securities and Exchange Commission allowed the U.S. and world’s largest cryptocurrency exchanges, Coinbase (COIN) and Binance, to trade digital currencies on their platforms, both of which are supposed to be registered with the authority. filed a lawsuit for doing so.
This has raised new concerns that trading certain digital assets could become more difficult. Since early 2023, the SEC has prosecuted 15 different cryptocurrency officials for securities law violations.
An unexpected upturn in sentiment for the industry began on June 15, when BlackRock, which manages more than $9 trillion in assets, filed documents with the SEC to form a spot bitcoin exchange-traded fund.
Rather than simply tracking bitcoin futures, such funds would be tagged to the value of the underlying digital asset. Coinbase will be the custodian of Bitcoin holdings.
“Institutional custodians step in and play a role,” said Joseph Chaloum, BlackRock’s head of strategic partnerships, at Coinbase’s State of Crypto Summit in partnership with the FT on Thursday. I think there is an element of needing to participate in the token economy.”
The value of Bitcoin skyrocketed following the announcement. Other institutional investors, such as Invesco and Wisdom Tree Investments, also quickly updated spot Bitcoin ETF applications previously submitted to regulators.
The effort still faces major hurdles. The SEC has rejected 27 previous applications to create spot bitcoin ETFs since 2013, claiming the product is vulnerable to market manipulation.
In fact, the Wisdom Tree was rejected in 2021. An asset manager, Grayscale Investments, is suing the SEC after it failed to convert its Grayscale Bitcoin Trust (GBTC) for spot bitcoin offerings.
“Conflict of Interest”
Another move for the industry came this week when a new cryptocurrency exchange backed by Citadel, Fidelity and Charles Schwab announced it had begun executing trades.
The venture, EDX Markets, began discussing the plan in late 2022, touting it as a business that would “eliminate any significant conflicts of interest affecting existing cryptocurrency exchanges.”
He made a similar point last week, citing a “non-custodial model designed to mitigate conflicts of interest.” It does not handle customer-owned digital assets, instead operating a marketplace where buyers and sellers transact directly.
As part of the FTX bankruptcy last year, it was revealed that a partner trading company was using customer assets to conduct its own trading. The SEC also alleges that Binance misused customer funds, an allegation that Binance denies.
Earlier this month, SEC Chairman Gary Gensler told reporters that the standard business model for cryptocurrency exchanges is built on “disputes,” “limited disclosure,” and “sometimes deception.” said that
“FTX just validated our business model,” EDX CEO Jamil Nazarari said in an interview. What EDC is doing is “taking full advantage of the digital world, 24/7 trading, and many of the innovations in blockchain, and combining that with investor protection in traditional finance,” he said. added.
EDX announced that it will only offer trading in four cryptocurrencies: Bitcoin, Ether, Litecoin and Bitcoin Cash. None of these assets are considered securities by the SEC, so EDX may be able to sidestep some of the issues facing his Coinbase and Binance.
Together, these exchanges will allow the trading of 19 digital currencies labeled as securities by the SEC. This means that it must be registered with the SEC. According to data compiled by Cryptorank.io, the authorities have designated a total of 55 cryptocurrencies as securities in various lawsuits.
Coinbase has filed a lawsuit and denies the SEC’s allegations. On Thursday, the company’s CEO Brian Armstrong looked unconcerned during a speech at a cryptocurrency conference in New York.
Instead, he said, in the next five to seven years the Coinbase platform could turn into a WeChat-like “super app” used in Asia for everything from messaging to banking to ordering food. .
“Despite the negative rhetoric and headlines, the industry is moving forward,” he said.
Roger Balston, head of digital assets at Franklin Templeton, said regulatory oversight is needed.
“Although there have been difficulties, the regulatory clarifications are poised to introduce standards that will allow the flow of capital,” he told Yahoo Finance.
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