Toby Norfolk-Thompson, Matrixport

First things first – for those who don’t know, who are you and what do you do?  

Norfolk-Thompson: Matrixport is a full-service digital assets prime broker, which was spun out of BitMain (the world’s largest Bitcoin mining hardware manufacturer) in 2018 by founder Jihan Wu, and reached unicorn status in August 2021. Now we’re looking to drive forward our institutional prime financing and collateralised lending activities, and to support our hedge fund and family office clients. As well as prime financing we also invest in funds directly, we have a fund accelerator program, and we’ve been building out that function in the UK and the US recently. 

How do you see the institutional crypto space developing, in terms of both the attitudes and the access of institutional investors towards digital assets?  

Zadeh: What we’re finding is more and more names and more partnership deals coming into frame. That’s creating a sense of FOMO at C suite-level – when other asset managers are seeing BlackRock do a deal with Coinbase, for example, that spurs on a lot of activity with C-level saying OK, we need to be getting involved with that asset class as well. We’re now seeing that FOMO trickle down, so more and more asset managers are starting to strike deals. Just a few days ago we saw BNY Mellon launch a new digital asset custody offering, which will spur on a lot of their clients, out of a very large customer base, to look more closely at digital assets. We’re seeing a high level of hiring of new heads of digital assets at asset managers, trying to get in on this game.  

In terms of actually getting down into real nitty gritty of trading these things? That’s probably going to be 2023/24 phenomenon.

In terms of actually getting down into real nitty gritty of trading these things? That’s probably going to be a 2023/24 phenomenon. But the fact that those wheels are now turning, those hires are now being made, suggests that it’s definitely on the way and there are clear strategies for digital assets to generate revenues, it’s being placed into the three-year plans of pension funds and asset managers already. On the hedge fund side, pretty much every hedge fund in the top 50 is now either trading in crypto, or looking at coming into crypto pretty quickly and setting lines up within the space.  

When you say we won’t see trading till 2023/24, is it that the infrastructure is there but the appetite is not, or is it the other way around? 

Zadeh: A bit of both. The infrastructure that pension funds and hedge funds require is very complex, and that is half there now, and more is coming. The appetite is definitely there to get there, to start trading, but there are a lot of regulatory hurdles. For pension funds that are more risk averse, that’s what is holding them back. But they are getting there, they are preparing the decks, I think most have accepted that crypto is going to be a critical component of their trading desks in the future, they’re just getting ready for when we get the all-clear from regulators. 

We’re also seeing banks opening up desks, and once the banks start doing that, we’ll definitely start seeing a bigger trickle-through into the buy-side.  

Will we ever see banks prop trade crypto? 

Zadeh: I think that might be quite a lot further down the line! 

Norfolk-Thompson: It’s all about capital liquidity rules. It’s impossible for banks right now to hold digital assets on their balance sheets at the moment because of crypto capital rules. Therefore they are having to interact either by setting up new divisions to hold digital assets, which is what Nomura is doing with Laser Digital, and what BNY Mellon are doing with their custody services. Those capital rules will develop – the UK and Switzerland are probably leading the race on that one though, the picture is more complicated in the US. 

Another point is that when you’re talking to the BlackRocks of this world, most of the larger institutions have at least a 12-18 month approval cycle. So they’ll have kicked off with a small sandbox where they let people play around with a few million dollars first, and now those cycles are starting to come to fruition, and we will see more people coming into the market in a more serious way. 

What are players like Matrixport doing to support that? 

Norfolk-Thompson: We are trying to support more active and fixed income focused traders come into the market. We’ve built out our research function, we’ve made new hires, and we’re putting out a weekly research piece focused on the things that active fixed income traders need – yield opportunities, volumes, what is executable, and what the underlying revenues of the system look like. It’s all moving along, but what’s urgently needed in the market right now is education.  

What does the liquidity profile look like, and why is there still so much reticence from the buy-side?  

Zadeh: The buy-side have different mandates, and these only allow them to deal in certain areas, so they’re restricted in terms of what they can go into. What we’re seeing right now is that a lot of the pension funds and hedge funds, even though they’re interested, aren’t actually the key players in this space. A lot of the volume is not being generated by the traditional names, but by the crypto native, digital native names. They’re becoming the big names, and the heavy hitters – very different to the traditional markets. It’s a new type of name that many firm wouldn’t even know if, if they don’t know this space. These guys are very nimble, very sophisticated, and they have access to capital at a very low level. They can build very complex algorithms to trade across – the market is so fragmented, and there are so many exchanges that they can find opportunities on. It’s these really nimble firms that can move really quickly when they see an opportunity, and get that accepted to trade really quickly, that are generating the most alpha and delivering the best returns. These are the firms we think will remain strong going forward.  

But once the big high frequency trading guys, the Chicago and US-based guys who haven’t yet fully committed, once those guys enter the market, they have access to the fastest and best technology, and the most capital, so how much of the market will be made more efficient once these guys start coming in and cleaning up these market inefficiencies? I wonder how many of these digital-native firms will be pushed out, once that happens. The discussions I’ve been having with the biggest digital-native players, they feel that the systems and the apps that they have built over the last four to five years are so strong that it will take a long time for anyone else to catch up if they’re starting from scratch. A lot of the market right now is systematic and API-driven – manual traders, point and click, macro crypto hedge fund traders are few and far between. It’s a systematic, API, blackbox game right now, with coders in the driving seat.  

Norfolk-Thompson: There is more liquidity out there than people think. There are a number of very specialist players with very deep pockets, who are happy to take a lot of risk in order to provide that liquidity.  

What’s on the cards for the rest of the year? 

Zadeh: One thing on the roadmap for us that is very close to fruition, based on our institutional focus, is a move to bring the institutional tools that traders are used to from the traditional world, into the crypto world. First and foremost, this will start with trade ideas. Hedge funds are very used to having a trade ideas person at every bank or broker, so they’re constantly being fed trade ideas, told where there is an opportunity, built out from research, and every morning sales guys at banks and brokers are shooting that out to everyone. This is something we’re now about to launch ourselves, providing trade ideas to clients – not saying “we’re a broker, use us for lending and execution services” but just adding colour and value to the space. That hasn’t happened in digital assets yet, and we’re looking to translate that over from the traditional market into the space for the first time.  

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With current crypto values exceeding $2 trillion, the market for digital assets is surging and institutional interest is rapidly increasing. A new report from PwC, in partnership with the Alternative Investment Management Association (AIMA) and Finery Markets – which bills itself as the first global crypto-native multi-dealer platform – suggests that we could finally be seeing the first evidence of mainstream institutional adoption.

However, with numerous different digital assets to choose from and (according to Coin Market Cap) over 300 exchange platforms to trade through as of January 2022, the key question is where – given the sophisticated requirements of institutional market participants – is best to execute your trades.   

“A client’s choice of digital asset execution venue may be influenced by the offering and acceptance of fiat and cryptocurrency, the reputation of the exchange in an already polarised market, and the costs associated with the transaction and the market prices that are achieved,” said PwC.  

Centralised exchanges (CEXs) such as Binance (the most popular centralised execution venue among the 77 buy-side participants surveyed), Kraken and Coinbase are strong favourites, due in large part to the security and liquidity they offer, the report noted.  An overwhelming majority of trading (more than 90% of participants, according to PwC) currently occurs via CEXs, which leads to lower liquidity risks and narrows the bid-ask spread for a more accessible market, but there are also downsides, including potential for hacking attacks and the perception that they are often not built to handle the scale of large transactions that institutional players are looking for 

Decentralised exchanges (DEXs) are another option. These mitigate the hacking issue because they don’t exist on an exchange, so from a security perspective, the exchange of digital assets is less prone to an attack. However, a notable drawback of decentralised exchanges is their lower liquidity and the risk of market manipulation. 

“The keywords here are miners extracting value, front runners and automated market-makers. In a nutshell, fluctuations in prices and execution times in the digital asset landscape allow the validators of blockchains to interfere with the orders that are made public,” explained the report.  

There is also a risk that large-volume DEX orders could also face hacks, while another concern is that the emphasis on privacy and lack of transparency could make essential due diligence impossible. Around a third of participants currently trade on DEXs, according to the report, with the most frequently used platforms being Uniswap, SushiSwap and 1inch. 

OTC venues are emerging as an increasingly popular alternative, as they allow investors to trade high volumes at a pre-agreed price. However, they are less efficient than exchanges – when a party submits an order, they need to wait for a counterparty to engage, which can delay execution, while the lack of a delivery versus payment mechanism means there is a risk of a party defaulting. Among the institutionals that trade with OTC desks (which accounted for around half the survey participants), the most popular counterparty is B2C2, followed by Cumberland, Genesis Trading, Galaxy digital, BlockFills and DV Chain.  

Finally, smart order routing (SOR) is also gaining traction among institutional investors, using an algorithm to determine the best price for the transaction. Through a pre-determined scope of trading venues, the SOR seeks to achieve the most favourable trading condition. The method is appealing in terms of best execution because it can access several trading venues simultaneously. This means the range of digital assets traded is broader, and liquidity can be aggregated – a distinct advantage in such a fragmented landscape. However, the method is highly complex which limits take-up even among institutional players.  

“When choosing an exchange, the respondents seem to place importance on execution and liquidity quality,” said the report. “The second most important factor is the assets an exchange supports. Rounding off the top three, regulation and jurisdiction reputation is the final factor in the choice of exchange.” 

Interestingly, fees and commissions came in fourth place, suggesting that players are currently willing to pay more in transaction fees if the exchange has other features they want, such as a wide range of assets, best execution capabilities, and legal certainty.  

In summary, institutional trading of digital assets is still in its early days and the market has yet to consolidate into any identifiable trend or preference. Almost all institutional investors use more than one platform to trade, with at least 25% using more than 10 venues. But consolidation could start to appear as volumes increase – similar to the FX market, which also used to be highly fragmented.  

And the outlook is promising. The report found that almost 70% of the companies that have traditionally traded in financial instruments are now engaging in trade in the digital asset landscape, marking a positive long-term trend. “This shift of traditional finance companies making the transition into digital assets could be the start of mainstream adoption of digital asset by financial institutions,” noted PwC.  

Volumes are still low – the highest number of respondents trade less than $10 million a month in digital assets. But these too are growing. “Even though there are a greater number of companies that trade less volume, the volumes of institutionals that trade more than $10 million are much greater in total,” found the survey. “A bullish market may lead to more institutional entries to the market and may increase the volumes traded in the future. 

With over 60% of participants already looking to improve their current trading setup for digital assets, the market may not yet be fully mature – but it’s certainly moving in the right direction.  

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Martin C. Grant

As the question of crypto regulation gathers momentum, digital assets specialist JST Capital has confirmed the appointment of Martin C. Grant as its new global head of regulatory affairs and integrity, responsible for navigating the evolving digital asset regulatory environment to ensure best practices and hold discussions with global regulators as they work to adopt new policies to regulate this unique marketplace.  

Additionally, he will act as a resource for JST’s global client base to help them understand the intricate nature of regulations in order to make informed investment decisions. 

Grant joins JST from the Federal Reserve Bank of New York, where he held the role of senior vice president and chief compliance and ethics officer for over 15 years, responsible for building and leading the bank’s internal compliance efforts. Grant has also worked with other state and federal regulators as well as government agencies to harmonise compliance policies within Federal Reserve Banks and financial institutions around the globe, and has provided technical assistance and guidance to central banks around the globe on compliance policies and practices.  

Formerly a lawyer in the New York Fed’s enforcement and litigation division, Grant is also the chair of the Conference Board’s Global Business Conduct Council and a member of the Compliance Committee of the Association of the Bar of the City of New York.  

“Throughout 2021, JST has continued to expand in order to meet growing institutional demand. We increased our headcount, tripled the number of clients and saw a 10-fold increase in gross revenue,” commented Scott Freeman, co-founder and partner at JST Capital. “By bringing in Martin, who has over 30 years of experience operating in the regulatory and compliance space, JST is doubling down on its mission to not only offer clients unmatched financial services in the crypto sector, but to also assist in navigating the regulatory environment. We are excited to welcome Martin to the team and work alongside him to engage with regulators around the globe.” 

Grant is the latest senior executive to move into the digital assets arena, a trend that has been notable on both the industry and regulatory sides of the fence. In January this year, Digital Asset appointed former chairman of the United States Commodity Futures Trading Commission (CFTC), J. Christopher Giancarlo, to its board of directors, while in August 2021 former US Securities and Exchanges Commission (SEC) chairman Jay Clayton joined crypto platform Fireblocks as an advisor.  

“Regulators around the world have begun to realize the full scope of digital assets and the role they play in the global economy and as a result are rushing to establish fulsome policies that protect market participants at all levels,” commented Grant. “I am looking forward to working with regulators and establish an open dialog in order to advance regulation that benefits both the investors that use our services and the wider crypto industry.” 

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US crypto exchange FTX US has confirmed that it will be making a strategic investment into IEX Group, the operator of the US-based Investors’ Exchange, in order to develop a transparent market structure for the buying, selling and trading of digital asset securities.

The question of crypto regulation has long been a thorny problem , and FTX US has been clear about its ambitions to become a regulated exchange, working with regulators to create a platform that enables both retail and institutional engagement with digital assets.  

The new partnership with IEX, an alternative trading system first launched in 2013 with a focus on investor protection, is another step down this road.  

“To unlock its full potential, the crypto and digital asset industry needs to engage with regulators and truly scale what has been built,” said CEO and Co-Founder of IEX, Brad Katsuyama.  

“From the first conversation with Sam [Bankman-Fried, CEO of FTX and FTX US], it was clear to me that FTX and IEX were truly aligned on the future potential for digital assets and the unique roles our firms could play as partners in shaping market structure that benefits the end investor. We both see the regulators as important allies in providing a clear path forward and attaining the highest possible standards for investor protection. The US market should be the largest player in digital assets globally and we believe that this partnership will help facilitate that.”

Earlier in March, parent company FTX Trading partnered with US-based crypto platform West Realm Shires Services to launch a new unit targeted at institutional investors. FTX Access will initially provide institutional investors interested in gaining exposure to digital assets with trade execution, analytics, index products, advisory services  and capital introductions, with plans to expand into custody, derivatives, structured products and other asset management products later down the line.

The recent developments accompany a growing interest in regulatory oversight for the sector. On 9 March, President Biden signed into law the ‘Executive Order on Ensuring Responsible Development of Digital Assets’, the first real attempt by US authorities to comprehensively address supervision of the fast-growing crypto space – including the potential development of a US central bank digital currency.  

“The order is a significant step toward developing a comprehensive federal approach on digital assets,” explained law firm Shearman & Sterling in a recent analysis. “Although the order does not prescribe a regulatory framework itself or require the issuance of new rules, it directs various parts of the federal government to issue reports and recommendations on potential regulatory or legislative actions concerning digital assets.” 

In November 2021, non‑state issued digital assets reached a combined market capitalisation of $3 trillion, up from approximately $14 billion in November 2016, marking a compound annual growth rate of 192.5% over the past five years, and this explosive growth has not gone unnoticed.  

“The unique and varied features of digital assets can pose significant financial risks to consumers, investors, and businesses if appropriate protections are not in place,” stated President Biden in March. “In the absence of sufficient oversight and standards, firms providing digital asset services may provide inadequate protections for sensitive financial data, custodial and other arrangements relating to customer assets and funds, or disclosures of risks associated with investment. 

The latest partnership between FTX and IEX Group looks to be preparing for the potential advent of further regulation, and the two firms have promised more information in the coming weeks on how they plan to broaden investor participation in the digital asset securities market – including a new initiative encouraging all investors to join the conversation about the future of market structure for digital asset securities. 
 
“Investing in IEX created a tremendous opportunity for FTX US,” commented Bankman-Fried. “With this investment, we’re aligned with one of the most trusted and innovative companies in equities markets. I’ve long respected Brad’s vision for IEX to be an exchange that caters to the needs of the investor and treats them fairly – part of the reason why we’ve operated similarly at FTX. As a result, we will collaborate on the further establishment of crypto market structure and work closely with regulators, allowing institutions around the world to enter the marketplace seamlessly.” 

The move comes as institutional interest in digital assets continues to grow. In December 2021, research from London-based digital assets hedge fund manager Nickel Digital Asset Management revealed that over $60 billion worth of Bitcoin is currently held through various Bitcoin closed-ended trusts and exchange traded products, with US and Canadian funds accounting for an overwhelming 75% of the holdings. 

Anatoly Crachilov, CEO and founding partner of Nickel Digital, said analysis of digital assets performance versus traditional asset classes shows sizable outperformance by digital assets over the medium to long term. “This helps explain the increasing interest in digital assets by corporations and institutional investors as part of their wider asset allocation.” 

In January, MSCI moved into the digital asset sphere for the first time through a collaboration with institutional digital asset investment product and services provider, Menai Financial Group; while sector is also creaming off industry talent, poaching numerous high-level executives from more traditional roles.

Most recently, decentralised Financial Market Infrastructure (dFMI) firm Bosonic hired former global head of LCH ForexClear, Paddy Boyle, as its global head of clearing and derivatives; while in November 2021 Citi promoted Puneet Singhvi from its global markets business to head up digital assets for its institutional client group, with plans to hire up to 100 more within the division.  

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Derivatives giant CME Group has confirmed plans for a new daily US dollar reference rate 

Set to launch from 28 February 2022, the reference rates will be published daily at 4pm ET, the highest volume hour for cryptocurrency trading.  

“These new reference rates are designed to meet the ever-evolving needs of participants in the digital asset space,” said Tim McCourt, global head of equity index and alternative investment products at CME Group. “In Q4 2021, the New York calculation window was the second-most traded hour for Bitcoin futures behind the London rate. As we continue to see more institutional clients use our Bitcoin and Ether futures products in active portfolios or structured products like ETFs, these New York reference rates become increasingly important as they allow market participants to more accurately and precisely assess cryptocurrency price risk with timing more closely aligned to their portfolios and regions.”  

The new reference rates add to the existing CME CF Bitcoin Reference Rate (BRR) and CME CF-Ether Dollar Reference Rate (ETHUSD_RR), which provide a daily benchmark price for Bitcoin and Ether in US dollars, but are published at 4pm London time.  

The existing reference rates will continue to serve as the benchmark rates for settlement of all CME Group Bitcoin and Ether futures and micro futures. However, the new rates will serve to synchronise the US markets, adding a new risk management tool for crypto investors, especially on the institutional side, where large blocks are traded.  

“When you run a 24/7 global crypto business, you need a regional end-of-day benchmark rate,” noted Joe Hickey, global head of trading at BlockFi, a crypto trading platform with over a million customers and more than $15 billion in assets under management.  

“This will help fill BlockFi’s institutional client demand for a liquid benchmark rate during New York hours, while also providing a new way for us to monitor the markets regionally.” 

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Image: Pierre Borthiry

Crypto prime brokerage, Genesis, has released record performance figures for the fourth quarter of 2021, highlighting the seemingly unstoppable march of cryptocurrency into the mainstream.

The platform, which is owned by giant blockchain investor Digital Currency Group, recorded its strongest quarter to date, with approximately $102 billion in transactional volume, cementing a year of significant growth across all of its business lines. Loan originations reached $50 billion, up 40% over Q3 2021. For the full year, loan originations totalled $131 billion, nearly seven times higher than 2020.

Notably, trading volumes also surged. In 2021, Genesis recorded spot trading volumes nearly six times higher than the previous year, at $116.5 billion, while derivatives notional volume grew nine times to $53.8 billion.

In its market trends report released this month, the broker identified a number of key trends in the institutional crypto market: including the continued diversification of digital asset investments, the deepening sophistication of institutional investors entering the crypto market, new types of institutions participating in the market, increasing allocations from managers of diversified portfolios and the growing need for multi-service institutional prime brokerages.

“Last year was a pivotal year for the crypto industry, and one that demonstrated the merits of smart tactical trading around a core position,” said Michael Moro, CEO at Genesis. “As this asset class continues to mature, driven by increasing institutional participation and growing regulatory clarity, we believe that taking a comprehensive approach to portfolio management will only become more important.”

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With household names like Uber, eBay, PayPal, Visa, Spotify and MasterCard backing the project (and not a single bank in sight), Facebook’s foray potentially signals another nail in the coffin for the traditional banking industry.

For investors, both retail and institutional, that have embraced the world of digital assets, Libra has been touted as the means by which cryptocurrencies could be brought to the masses – 2.7 billion people to be precise. Bitcoin’s price surged to highs not seen in over a year following Facebook’s announcement, but questions from central bankers, regulators and other more traditional financial institutions may have cast some doubt on the potential impact of Libra.

First and foremost, what is Libra? Facebook’s whitepaper on Libra states that the digital currency will be built on a secure blockchain, backed by a reserve of assets, and governed by the Libra Association, the network of technology giants working alongside Facebook. The assets backing each Libra coin, according to the whitepaper, will be a collection of low-volatility assets including bank deposits and government securities, and the money for the reserve will come from investors in a separate investment token, as well as the users of Libra.

So, Libra differs greatly from the flagship cryptocurrency Bitcoin, which has no reserve and is not backed by any asset or currency (its value is derived from the belief that it has value). With this in mind, the Libra coin should fall into another category – stable coins or asset-backed tokens.

Alongside this uncertainty, questions have arisen as to where it will sit in the current financial and regulatory ecosystem, particularly in Europe and the US. But Libra’s launch could force regulators, who have already expressed concerns that Facebook’s coin might replace fiat currencies, in turn instigating mass financial instability, to seriously address the seemingly unstoppable rise of digital currencies.

As for the traditional banks, as most often is the case, they have been left behind. If Libra takes off without mass regulatory interference, what role does the bank play in the future? One indicator we can surely take from the Libra proposal, developed by a network of technology giants that have already collectively succeeded in changing the world we live in over the past decade, is that cryptocurrencies are here to stay.

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According to a new report, the total trading value will be 25% higher than in 2017.

“Cryptocurrencies have quickly emerged into a new asset class that nobody can afford to ignore,” the report said. “As the market gradually recovers from the panic-driven sell-off in early 2018, we expect the market value of cryptocurrencies to stabilise with healthy trading activity.”

Another notable finding was the importance of the over-the-counter (OTC) cryptocurrencies market. Aite Group estimates that around 21% – or $100 billion – of cryptocurrencies have been traded in the OTC market in the first four months of 2018 and expects to see an increasing market share of OTC trades moving forward.

The group found that institutional market participants are routing their orders to OTC desks for immediate access to block-sized liquidity, minimised market impact of trade orders, and security concerns over exchange venues.

“Trading liquidity is becoming increasingly fragmented on exchange venues, while institutional players usually trade with block-sizes – 1,000 bitcoin one trade would be normal for them,” explained the report author, Gabriel Wang. “Trading on the OTC venues gives them a piece of mind – as they don’t need to put assets on the wallets provided by exchanges – anonymity of trade and preservation of trading strategies as OTC trades don’t get reported.

“As the OTC firms continue to build out their IT infrastructure to support for more functions and requirements coming from institutional players, we expect to see the percentage of trades executed at OTC venues to go up.”

Institutional investors are facing a multitude of challenges before accessing the cryptocurrency market including security, market infrastructure and a lack of regulatory clarity.

Aite said the successful launch of Bitcoin futures and other cryptocurrency derivative products are helping institutional players better manage their risks, while the emergence of institutional trading platforms, particularly those established by incumbent financial technology providers, will help to further drive up institutional adoption.

Trading Technologies set up a platform earlier this year connecting to Coinbase for its clients to trade a range of cryptocurrencies, becoming one of the largest tech providers to offer access to the new asset class.

“While start-up companies in the crypto space are emerging and trying to fit themselves into the ecosystem and solve part of the puzzle, incumbent firms, especially those who already have capabilities in traditional asset classes, will continue to get into the cryptocurrencies markets and serve the institutional community,” added Wang.

Last week, SIX Exchange announced its intentions to launch a fully integrated trading, settlement and custody infrastructure for digital assets in 2019.

Custody provision and safeguarding of assets is another issue, however traditional custodians are set to come to the fore with their own offerings in the near future, while venues such as Coinbase are also launching their own services.

“While the cryptocurrencies market has gained much industry attention and has garnered noticeable money flow from the institutional community, certain challenges have to be addressed before institutional adoption can reach the next level,” said Aite in its report.

“The lack of a clear definition and classification of cryptocurrencies, global regulatory uncertainty, and other trading-related issues pose serious threats to the growth of this emerging asset class.”

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Crypto Facilities announced the new derivatives contracts will start trading at 4pm BST on Friday 22 June and will allow traders to go long or short the cryptocurrency. The company already offers futures products on Bitcoin, Ripple and Ethereum.

Timo Schlaefer, CEO of Crypto Facilities, commented that there has been strong demand from users of the crypto trading platform for Litecoin futures and the contracts are a step towards providing increased price transparency.

“There has been strong client demand for this product and we believe our LTC-Dollar futures contracts will increase price transparency, liquidity and efficiency in the cryptocurrency markets,” he said. “As digital assets continue to mature, we expect to see a greater number of institutional investors entering the marketplace.”

The launch is the latest development in cryptocurrency futures, follow the launch of Bitcoin futures by major global exchange operators’ CME Group and Cboe Global Markets late last year. However, institutional investors globally have held back from dipping into the crypto market due to regulatory, liquidity and volatility concerns.

Crypto Facilities currently provides CME Group with the CME CF Bitcoin Reference Rate which powers CME Group’s Bitcoin futures, as well as the CME CF Ether-Dollar Reference Rate and Real Time Index.

Litecoin’s creator Charlie Lee added that Crypto Facilities’ Litecoin futures launch will bring more institutional players to the market.

“Litecoin futures will open up LTC trading to more institutional investors,” Lee said. “This will add to the liquidity of Litecoin and make it easier for people to get in and out of Litecoin.”

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The firm said initial contracts will available be for Bitcoin non-deliverable forwards (NDFs) settled in USD, listed under a new brand ‘trueDigital’ on its existing swap execution platform, pending regulatory approval.

The trueDigital contracts will be subject to licensing and services agreements with the newly created trueDigital Holdings business, which will act as the sales and marketing arm for new products.

The swap execution facility said despite digital assets including Bitcoin and Ether comprising in excess of $430 billion in market capitalisation, the marketplace has been lacking regulatory and technology building blocks for institutional involvement.

“Institutional investors and commercial partners are ready for a regulated and liquid marketplace to gain exposure to and hedge these increasingly important digital currencies and commodities,” said trueEX co-founder and CEO, and CEO of trueEX Digital Holdings, Sunil Hirani.

“The marketplace is sorely lacking the necessary foundation, infrastructure and platforms that institutional investors have come to expect in other important markets.”

ED&F Man Capital will act as the first futures commission merchant (FCM) to offer prime brokerage services on digital asset forwards on trueDigital.

Brooks Dudley, vice president of risk at ED&F Man Capital, explained NDFs are the next logical step for institutional investors seeking exposure to Bitcoin and other digital currencies.

“[Hirani] is a proven innovator in financial products and market infrastructure, and one of the earliest advocates for the use of digital assets in institutional finance. We’re looking forward to working with his team at trueDigital,” Dudley said.

trueEX also announced it will team up with blockchain software provider ConsenSys to develop a benchmark rate for digital asset Ether, and to develop the infrastructure for the broader adoption of cryptocurrencies by institutional investors. ConsenSys was recently selected to support a new initiative by the European Commission, to monitor and engage with the development of European-based blockchain projects.

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