• Investment brokers want into the crypto market, with Fidelity Investments (assets under management valued at over $7 trillion) leading the pack

  • Stock exchanges are taking note, with the Jamaica Stock Exchange set to become the world’s first to list bitcoin, Ethereum and security token offerings (STOs)

  • 2019 is proving to be a bull year for the crypto world’s relationship with regulated financial institutions, helping to thaw the crypto winter

By: Jai Waterman, Co-Founder and Chief Enterprise Architect

News that Fidelity Investments is about to open its Fidelity Digital Asset Services (FDAS) trading desk is fantastic. Coming from an industry behemoth with over $7 trillion USD in assets under management, the Fidelity crypto play gives a huge amount of credibility to bitcoin and serves as a powerful counter-argument to those who say crypto is mostly for bottom feeders.

What’s more, FDAS is targeting institutional investors, meaning their list of high-profile corporate clients with deep pockets will bring even more credibility (and liquidity) to the digital currency market.

And Fidelity isn’t alone in demonstrating an appetite for crypto. Even major firms that aren’t trading cryptos just yet are dipping their toes in the water, like TD Ameritrade, which has been hosting popular crypto education events for its customers.

What’s clear is that broker-dealers want to get in on the crypto action. And stock exchanges are paying attention.

The NYSE’s Bakkt exchange for crypto futures is set to go live this year - if not this month - and the Jamaica Stock Exchange (JSE) has partnered with Blockstation to list BTC, ETH and security tokens.

2019 is proving to be a bull year for the crypto world’s relationship with regulated financial institutions, taking us further away from questionable banking practices that led to the Bitfinex-Tether investigation and towards a safer, regulated, insurable crypto future.

It’s a good sign for crypto when Jeffrey Sprecher is buying bitcoin

While previous efforts at bringing crypto to traditional financial markets like the Winklevoss twins’ cryptocurrency ETF or Goldman Sachs’ purchase of Circle didn’t pan out as hoped, the crypto market has clearly reached a level of maturity that makes efforts like FDAS viable.

The fact that NYSE chairman Jeffrey Sprecher has been buying up bitcoin ahead of Bakkt’s launch is just one more positive indicator that this time, things are different.

More crypto marketplaces are a double-edged sword

While adding new marketplaces like FDAS is great for growing the crypto community, it also leads to a less efficient market overall and inconsistent prices from marketplace to marketplace. This creates a lot of opportunities for crypto arbitrage, putting retail investors who don’t have access to a sophisticated arbitrage bot at a significant disadvantage.

We need a better way to achieve market efficiency, because efficiency leads to consistent pricing which leads to investor confidence.

Which leads us to a centralized order book where liquidity from multiple sources flows through one place, helping to normalize the price of any given asset - in other words, the stock exchange.

Exhibit #1: the Jamaica Stock Exchange

In working with Blockstation, the JSE is accomplishing more than just listing and trading compliant, insured BTC and ETH through its brokers. It’s also set to go live with listing security token offerings (STOs).

Why is this a big deal?

Because once JSE-affiliated brokers can offer cryptos and STOs to retail investors, those same investors can purchase security tokens with their digital currencies, avoiding costly wire transfer fees associated with fiat currencies. Any stock exchange with these capabilities will have a major competitive advantage when it comes to attracting new issuers, while creating a fair and efficient market that benefits the entire financial ecosystem.

What’s more, stock exchanges rely on brokers like Fidelity and TD Ameritrade to onboard and manage investors, allowing brokers to funnel their trades through a fully regulated environment, increasing market efficiency for everyone.

So how high will bitcoin go?

If the ICO boom of 2017 helped push bitcoin to historic highs, imagine what adoption by financial market giants like Fidelity and stock markets like the JSE will accomplish.

These developments are a tremendous step in the right direction, signalling that crypto is well on its way to mainstream adoption.

Sign up for a (free) Blockstation Digital Asset Regulation workshop

Want to schedule a free educational workshop for your regulatory office, stock exchange, or depository? Submit the form below to get in touch:

  • better protect investors

  • maintain a fair marketplace

  • ensure transparency, and

  • mitigate systemic risk for you organization and industry partners

Sign up for a Blockstation Digital Asset Regulation workshop!