Traditional financial services firms, such as banks, are clearly poised to enter the crypto space, explained speakers at the Profit & Loss Forex Network New York conference.
“Banks are going to make so much damn money off of cryptocurrencies,” said Nikhil Kalghatgi, a partner at CoVenture, a firm that has a multi-strategy asset management platform for cryptoassets. “They’re chomping at the bit, laying the pipe right now in order to get connectivity, to answer all the regulator’s questions.”
When thinking about the evolution of technology underpinning cryptocurrencies the key question, according Kalghatgi, is whether it has the potential to be an Internet-sized phenomenon. He pointed out that there was a clear gap between when people first heard about about the Internet and then started using it, and that cryptocurrencies could follow a similar adoption trajectory.
“Try to think back to when you first got the Internet versus when you first heard about it…So it was probably three or four years before you got your first Internet, the equivalent of you getting your first bitcoin, and then how long did it take before you actually recognised that it was going to change the world? A couple of years later, three or four years later? Well right now, ask yourself if you have a bitcoin and when did you first get it? Dial forward three or four years from then and then you might be able to recognise a time when the average person is going to be able to realise, ‘Wow, this is something major’. We are still years away from that moment for most people,” he said.
Meanwhile, Sandra Ro, CEO of the Global Blockchain Business Council, revealed that she had just been in a series of discussions with European regulators and banks in Brussels and that cryptocurrencies had been a hot topic of conversation.
“I was shocked by the number of times blockchain, crypto and AI were actually mentioned by C-suite level executives. It is definitely a top of book conversation,” she said.
Ro explained that many of these conversations centred around creating a level playing field, with traditional financial services firms expressing concern that fintech firms are not subject to the same rigorous regulatory requirements as them and therefore have much more freedom to act and operate their businesses. She added that pressure from customers is making it inevitable that these firms are going to enter the crypto space.
“Everyone has clients who are demanding they look at this… At the end of the day, if your clients are asking for this, you are doing the work around it and it’s just a matter of time whether you decide to launch a trading platform,” said Ro.
For Shaun Cumby, CIO at 3iQ, a digital asset investment firm, cryptoassets represent a new asset class and he expects to see them follow a similar path to adoption as credit default swaps (CDS).
“Markets evolve. Products evolve. Eventually we’re going to see the equivalent of an ISDA group in cryptocurrency, we’re going to have standardised contracts, somebody is going going to propose a clearing house. It’s just going to become a much more efficient market. And when you have exchanges trading hundreds of millions of dollars a day and taking out 50 to a 100 basis points a day, I mean you just can’t ignore the money being made,” he said.