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Wall Street weighs in on Crypto

Posted:Jun 26, 2023 16:45 Category: Americas , Crypto , Regulatory , Posted by Jake Graves

Numerous major financial players are poised to significantly increase their Crypto industry engagement.

Industry leaders across the world’s markets, most notably those operating in the renowned Wall Street sector, are now actively participating across the Cryptocurrency sector. Acting to inject meaningful competition, diversification and energy into the industry.

BlackRock plan for a Bitcoin EFT

An enterprise at the true forefront of the asset management sector has already unveiled plans to launch an exchange-traded fund (ETF) predicated solely on Bitcoin (BTC).

This brings investors lucrative exposure to the world’s leading Cryptocurrency without having to directly or independently own the assets.

Charles Schwab, Fidelity Investments and Citadel Securities

Charles Schwab and Fidelity Investments, prominent asset management firms, are partnering with Citadel Securities to lend credibility and expertise to the development of the innovative Cryptocurrency exchange, EDX Markets.

These aim to eliminate conflicts of interest in traditional Cryptocurrency exchanges using a non-custodial model.

The non-custodial aspects solve these issues as it defines a platform where buyers and sellers can engage directly, without the exchange itself handling customer-owned digital assets.

Deutsche Bank and Crypto custody

The multi-national investment bank has expressed strong interest in operating a Crypto custody enterprise.

Specifically, this would involve the bank holding clientele digital assets through the provision of a secure and regulated storage solution for Cryptocurrencies, similar to how fiat currency is currently held in a commercial bank.

Deutsche Bank’s interest is a positive indication of the growing recognition of Cryptocurrencies as a legitimate asset class by traditional financial institutions.

The beneficial impact of Wall Street

The participation of these Wall Street veterans, along with numerous others, has not only provided a substantial sense of legitimacy to the volatile sector but has also exerted a tangibly fruitful impact on the value of Cryptocurrencies.

Most notably Bitcoin (BTC), the global leader, experienced never before seen growth just this year, to the tune of $31,389 at the end of last week, marking an 81% surge in value year-to-date.

Increases in the same vein have also been enjoyed by Bitcoin’s competitive peers, such as Avalanche’s AVAX (AVAX-USD) token and Ether (ETH-USD), which have also seen notoriety for their growth as of late.

In fact, the total market capitalisation for the Crypto market as a whole has $1.2 trillion as of last Friday.

Challenges to come

Unfortunately, these benefits come with several significantly insightful drawbacks that are set to hit the industry aggressively.

Regulatory scrutiny

Regulatory scrutiny is the biggest worry, particularly in the United States of America, with such disasters as the colossal collapse of the FTX Crypto exchange just last year inciting an exponential rise in concerns.

In addition to this, numerous major exchanges such as Binance and Coinbase have been hit with regulatory lawsuits from the US Securities and Exchange Commission (SEC) under allegations of security law violations.

These instances highlight the great need for those trading in digital assets of this nature to exercise active compliance with the regulations in order to remain open for business.

ETF application rejections

The SEC has also been at the heart of another challenge faced by the Crypto industry, in the historic and continued rejection of applications to being Bitcoin ETFs, for instance, the project being undertaken by BlackRock.

The rejection of these applications has been propagated by the SEC due to what they are describing as concerns over market manipulation.

This could hinder the market by preventing the development of any adequate methods that bridge the gap between novice and intermediate investors, impacting both the establishment of ETFs and the accessibility of the Crypto market.

Custodial issues and EDX potential

Wall Street weighs in on Crypto.Traditional Crypto exchanges, such as Binance and Coinbase, face multiple conflicts of interest and custodial issues as they so far take some degree of control over investors’ assets in order to have them active on their platforms.

However, initiatives such as the EDX exchanges the Citadel, Fidelity, and Schwab project is seeking to emulate, may have succeeded in overcoming this aspect of trading.

By avoiding the handling of customer-owned digital assets and simply providing a platform for buyers and sellers to trade directly, EDX exchanges should be capable of avoiding these issues altogether.

The future of Crypto and the role of major financial entities

Despite the significant challenges faced by the Crypto industry, its inherently adaptable and evolving nature is expected to benefit the sector.

The active involvement of major financial entities, offering innovative initiatives to enhance the value and reduce the volatility of Cryptocurrencies, holds the potential to bring stability and credibility to this nascent industry, should they be successful, making their involvement nothing less than intriguingly positive.

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