Digital Currency Market Gearing Up for Institutional Investors
Genesis Global Trading, an over-the-counter firm, and storage firm BitGo have teamed up to provide a service that is aimed at getting Wall Street more comfortable with entering the digital currency market.
Institutional investors who are storing digital assets via BitGo will now be able to use the Genesis platform to execute trades at the speeds they would see with traditional financial market FIX trading. If, for example, a person has 50 Bitcoin in their cold storage wallet at BitGo, they can receive a quote from Genesis and sell the digital currency immediately.
Once the person agrees to the trade, BitGo would lock up the 50 Bitcoin and hold them to transfer to Genesis, which then initiates a bank wire in US dollars to BitGo. Once the wire has gone through, the transfer is settled on BitGo’s books without anyone taking the coin out of storage–a process that normally takes at least 24 hours–without the transfer having to become part of the public ledger since Genesis has a BitGo Trust wallet itself, so the coins are never actually leaving the system.
This new service solves the time lag issue with cold storage, and it’s also meant to tackle the settlement and counter-party risk that is currently associated with crypto trading that occurs over the counter. In those scenarios, buyers are agreeing to prices with a counter-party but have to send the cash before they receive the Bitcoin. This doesn’t happen with traditional asset classes, and it understandably makes investors nervous.
An evolving landscape
BitGo is not the first company to make this move. A similar partnership was announced last year between trading firm OTCXN and Kingdom Trust, a custodian who is competing against BitGo. OTCXN has since signed up Prime Trust, a qualified custodian based in Nevada, and that move has sparked speculation that the firm may connect different cold storage providers. There are other institutional platforms with similar plans in the works, such as Fidelity Digital Assets, which is a brokerage and custodian firm that is close to launch, and from financial service powerhouse Fidelity Investments.
Stablecoins may still have their day
Some voices in the industry believe that the combination of existing infrastructures with stablecoins–cryptocurrencies that have been designed to maintain parity with fiat–is going to be the way to go as opposed to the adoption of a two-layer system. As seen with other technological advances, such as FIX trading, adoptions of new systems can be slow industry-wide. However, this alternative would likely require a larger bank coming in and being an anchor for that fiat/crypto trading, and so far, bigger banks don’t want to be too involved in the world of digital business just yet.
The advances being made in today’s technology will continue to shape the investment landscape for years to come. Although it’s too soon to say exactly where the world of digital currency will go, it’s likely to keep becoming a bigger part of the investment world.