Make Crypto Great Again Trump Helps Wall Street

Source:Katherine Doherty,Bloomberg

Original title: Wall Street Goes All In on Great Crypto Comeback Fueled by Trump

Just three years ago, a heated debate at the annual global derivatives market event, known as the "Davos of the derivatives market", attracted widespread attention. The two sides of the debate were Sam Bankman-Fried (SBF), the famous cryptocurrency billionaire and founder of FTX, and Terry Duffy, the head of the largest futures and options exchange in the United States.

At the time, the confrontation not only highlighted the deep doubts of traditional Wall Street about the new forces in the crypto industry, but also revealed the crypto giant's ambition to subvert the derivatives trading model. SBF hopes to promote digital assets into the mainstream market, while Duffy is a staunch defender of the traditional financial order. The two confronted each other, making this dispute the focus of attention inside and outside the industry.

But that is a thing of the past.

This year, just as executives of the world's largest exchanges and crypto companies were preparing to travel to Florida for a futures industry conference, US President Donald Trump announced that he would establish a strategic Bitcoin reserve. Although this move is more symbolic, it undoubtedly further established the legal status of digital assets as mainstream financial instruments.

For Wall Street institutions that have only tentatively entered the crypto market before, the next four years will be a rare opportunity. Driven by the Trump administration, the crypto industry is heating up rapidly. On Thursday, Bloomberg reported that World Liberty Financial Inc., a crypto company owned by the Trump family, has held business talks with Binance Holdings Ltd., the world's largest digital asset exchange, and may launch deeper cooperation.

This change in mood and atmosphere was vividly demonstrated at this week's meeting. The conference was held at the Boca Raton Hotel, where traditional financial executives and crypto industry practitioners gathered together to exchange ideas. As for the most noticeable difference, almost everyone wore suits this time, or at least collared shirts. The shorts + T-shirt dress that was the signature of the crypto circle in previous years has almost disappeared, and the scene has become much more formal.

Even the entertainment segment has a "old money" vibe. The legendary 1970s rock band Cheap Trick performed on stage to cheer up the audience - you know, sitting in the audience were financial giants such as Lynn Martin, president of the New York Stock Exchange, and Don Wilson, founder of DRW Holdings.

"The crypto industry is back." Catherine Clay, head of derivatives at Chicago options giant Cboe Global Markets, said in an interview. "After a few years of silence, we did see the crypto theme return at the Boca Raton conference."

Donald Trump promised during his campaign to make the United States the "global crypto capital," and since taking office, he has indeed been delivering on that promise. He signed an executive order on digital assets and pushed regulators to take action. His securities regulatory team has formed a working group specifically for the crypto industry, led by Hester Peirce, a long-time supporter of the industry.

All of this is boosting Wall Street's confidence in the crypto market. Ken Griffin's Citadel Securities, which has been cautious in the digital asset space in the past, is now seeking deeper involvement and plans to become a liquidity provider in the cryptocurrency market. Meanwhile, CME Group Inc. is expanding further with the launch of Solana futures after surpassing Binance as the world's largest bitcoin derivatives exchange. And Intercontinental Exchange Inc., which has kept its distance from the crypto market in the past, is also beginning to see opportunities and is preparing to enter the market to compete directly with its old rival CME, according to people familiar with the matter. Overseas exchanges are also following suit. At the conference, Singapore Exchange Ltd. (SGX) announced plans to launch Bitcoin perpetual futures in the second half of this year. The company said its first digital asset contract will be strictly for institutional clients.

"By the end of this year, more companies will move into the crypto space in a big way." Jeanine Hightower-Sellitto, chief business and strategy officer of EDX Markets LLC, a digital asset company backed by Citadel Securities, said in an interview, "Market sentiment has shifted dramatically over the past two and a half months, especially since Inauguration Day."

For Wall Street, this year's conference also brought a new consensus: blockchain technology, which supports cryptocurrencies, will be the key to driving 24/7 trading in the U.S. stock market.

Don Wilson, one of the founders of DRW Holdings and co-founder of the crypto company Digital Asset, said, "In the past few years, the crypto industry has been full of hype and exaggeration." But in his view, "The difference this year is that the market has really begun to realize that blockchain technology will play a central role in driving the transformation of the 24/7 trading model."

After SBF's company went bankrupt in 2022 and was convicted of fraud, the cryptocurrency industry lost its former glory. That year, the FTX exchange he founded hosted a late-night cocktail party on Boca Raton Beach, handed out branded merchandise at a giant booth in the showroom and hosted a fireside chat with baseball star-turned-businessman Alex Rodriguez, known as A-Rod. His free-spending has earned him a place among everyone from U.S. regulators to politicians and even Tom Brady.

But Duffy wasn’t buying it. The industry veteran, who longtime head of the Chicago Mercantile Exchange (CME), got his start on Chicago’s trading floor in the 1980s. He was skeptical of SBF’s ambitious plans. FTX wanted to handle all of its clients’ needs for crypto derivatives independently, using algorithms rather than brokers to help clear trades.

“I brought crypto to CME in 2017, and I didn’t even know who SBF was,” Duffy said in an interview this year. He bluntly stated that SBF's plan was "very dangerous from a risk management perspective."

Duffy did not shy away from their confrontation at the bar of the Boca Raton Hotel in 2022, calling it "a minor friction." In an earlier interview with Bloomberg, he recalled that he told SBF directly that he was a liar and that he had more money in his right pocket than the cryptocurrency executive's assets. This statement was confirmed when FTX filed for bankruptcy in late 2022. The bankruptcy case revealed a scam that lasted for many years, and prosecutors said SBF defrauded about $10 billion from customers, investors and lenders.

After FTX's collapse, regulators under the leadership of US President Joe Biden launched a large-scale crackdown on the cryptocurrency industry. The Commodity Futures Trading Commission (CFTC), the top US derivatives regulator, recovered a record $17.1 billion in enforcement actions last year, most of which came from digital asset cases against FTX and Binance.

Affected by this, some companies have taken the initiative to shrink their businesses and turn their attention to overseas financial centers such as Dubai, Singapore and Hong Kong. Trading giants Jump and Jane Street have scaled back their cryptocurrency market-making businesses in the United States. Cboe has closed its cryptocurrency spot business due to the lack of a clear regulatory framework in Washington.

Since Trump took office, the regulatory shackles have begun to loosen. Last month, the U.S. Securities and Exchange Commission (SEC) ended its investigation into Robinhood Markets Inc.'s cryptocurrency business and said it would not take any enforcement action. At the same time, the SEC also withdrew its lawsuit against Coinbase Global Inc., the largest digital asset trading platform in the United States, which had previously accused it of operating an illegal exchange.

In the past month alone, the SEC has dismissed or suspended at least 10 cases against cryptocurrency companies.

The rapidly changing regulatory environment is paving the way for institutional investors to participate more deeply in the crypto market, said Elisabeth Kirby, head of market structure at Tradeweb. Tradeweb is a company that operates over-the-counter markets, covering interest rates, credit, money markets, stocks, and cryptocurrency ETFs.

Banks are also actively deploying to try to grab more cryptocurrency business. Morgan Stanley, which was not active in the crypto field before, is now paving the way for potential IPO clients. Executives at Bank of America Corp. are discussing whether to push further into offering trading support for digital asset companies, while Royal Bank of Canada is looking to expand its business after completing its first crypto transaction late last year.

At this week’s conference, collaboration was the main theme. At the heart of the discussion was how traditional finance and the crypto industry can work together.

Even Duffy said he’s rooting for the success of the crypto industry now — after all, average daily trading volume for digital assets on the Chicago Mercantile Exchange (CME) surged more than 200% last year, with $6.8 billion in trading.

“We launched Bitcoin, then Ethereum, and now we just announced Solana,” Duffy said. “I want to see crypto assets become more mainstream.”