The New York Stock Exchange’s parent company ICE is developing a cryptocurrency exchange, a report by New York Times indicates. The move defies all expectations about the company’s plans. The closest bet for many was that NYSE would get into the futures or derivative markets.
The company seems serious about letting its clients fully immerse in cryptocurrencies, with the ability to directly buy, sell and hold. The exchange will target large investors according to the report.
ICE is currently said to be talking to financial institutions to facilitate swap contracts that will give it the necessary liquidity. The arrangement will also help the company stay in compliance with existing laws.
It is not clear at the moment whether other cryptocurrencies such as Ethereum will be added. The plans are not yet solid and the venture could even be dropped altogether say in the absence of proper regulation.
CBOE and CME launched bitcoin futures contracts late last year becoming one of the few major financial institutions to dabble in the market. Many others have opted to stay away in light of the largely obscure regulatory environment.
If it comes to fruition, investors will be afforded the opportunity to skip the futures and derivatives contracts that have been providing them exposure to the market in the last few months. The planned exchange would put it directly in competition with the likes of Coinbase which have gained a foothold in the US market.
Tough Competition
Coinbase offers a similar service for large institutional investors through Coinbase Custody which accepts no less than $15 million. It will be interesting to see what strategy the NYSE will use to win this customer base to itself.
Nevertheless, the entry of the NYSE, the largest stock market worldwide sends a clear signal that cryptocurrencies can no longer be ignored even by the largest of players.
Several big players are eyeing the market but the lack of clear regulations means that many are still holding back. George Soros is recently reported to have authorised his estate to trade in cryptocurrencies. An investment firm associated with the Rockefeller’s has also entered the space.
Others remain sceptical. Billionaire investor Warren Buffet continued his tirade against the industry comparing investing in cryptocurrencies to taking rat poison.
Nasdaq and Goldman Sachs have both expressed interest in establishing cryptocurrency exchanges in the future.
Bitcoin has so far failed to function as a currency for daily transactions – at least in the mainstream – owing largely to its high volatility.
It was initially built with a vision to replace fiat currency and bypass financial institutions such as banks. It is however yet to reach a threshold where it enjoys popular use. Banks and regulators have grown wary of its rise and having pulled all the stops to curtail transactions through their systems.
For investors buying bitcoin, the digital currency has become more of an asset to acquire and hold in the hope that it will go up. Bitcoin also has scalability issues but this has largely been taken care of by other rival currencies.