Source: Bloomberg

Author: Katherine Doherty

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

Translation: BitpushNews Yanan

Just three years ago, a heated debate at the annual conference of the global derivatives market—dubbed the "Davos of the Derivatives Market"—attracted widespread attention. The two sides of the debate were the renowned cryptocurrency billionaire and FTX founder Sam Bankman-Fried (SBF) and Terry Duffy, the head of the largest futures and options exchange in the U.S.

At that time, the confrontation not only highlighted Wall Street's deep skepticism towards the new forces in the crypto industry but also revealed the ambitions of this crypto giant to disrupt the derivatives trading model. SBF aimed to push digital assets into the mainstream market, while Duffy was a staunch defender of the traditional financial order, making their dispute a focal point of interest both inside and outside the industry.

But that is now a thing of the past.

This year, just as executives from the world's largest exchanges and crypto companies were preparing to head to Florida for the futures industry conference, U.S. President Donald Trump announced plans to establish a strategic Bitcoin reserve. Although this move is more symbolic, it undoubtedly further solidified the legitimacy of digital assets as mainstream financial instruments.

For Wall Street institutions that had previously only tentatively ventured into the crypto market, the next four years will be a rare opportunity. Under the push from the Trump administration, the crypto industry is rapidly heating up. On Thursday, Bloomberg reported that the Trump family's crypto company, World Liberty Financial Inc., has engaged in business discussions with Binance Holdings Ltd., the world's largest digital asset exchange, potentially leading to deeper cooperation.

This shift in sentiment and atmosphere was vividly displayed at this week's conference. Held at the Boca Raton hotel, traditional finance executives and crypto industry practitioners gathered to exchange ideas. The most noticeable difference was that almost everyone was dressed in suits, or at least collared shirts. The iconic shorts and T-shirts of the crypto circle were nearly absent, making the event feel much more formal.

Even the entertainment segment exuded an "old money" vibe. The legendary rock band Cheap Trick from the 70s took the stage to entertain the audience—note that among the attendees were financial bigwigs like Lynn Martin, president of the New York Stock Exchange, and Don Wilson, founder of DRW Holdings.

"The crypto industry is back," said Catherine Clay, head of derivatives at Cboe Global Markets, in an interview. "After a few years of silence, we are indeed seeing the crypto theme return to the Boca Raton conference."

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

All of this is boosting Wall Street's confidence in the crypto market. Ken Griffin's Citadel Securities has historically been cautious in the digital asset space but is now seeking deeper involvement, planning to become a liquidity provider in the cryptocurrency market. Meanwhile, CME Group Inc. has expanded further after surpassing Binance to become the world's largest Bitcoin derivatives exchange, launching Solana futures. According to insiders, the Intercontinental Exchange Inc., which had previously kept its distance from the crypto market, is also beginning to see opportunities and is preparing to enter the market to compete directly with its old rival CME.

Overseas exchanges are also following suit. At this conference, the Singapore Exchange Ltd. (SGX) announced plans to launch Bitcoin perpetual futures in the second half of this year. The company stated that its first digital asset contract will be strictly aimed at institutional clients.

"By the end of this year, more companies will be making significant moves into the crypto space," said Jeanine Hightower-Sellitto, chief business and strategy officer of EDX Markets LLC, a digital asset company backed by Citadel Securities. "In the past two and a half months, especially since the inauguration day, there has been a huge shift in market sentiment."

For Wall Street, this year's conference also brought a new consensus: the blockchain technology supporting cryptocurrencies will become 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, stated, "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 is truly beginning to realize that blockchain technology will play a core role in transforming the 24/7 trading model."

After the bankruptcy of SBF's company and his conviction for fraud in 2022, the cryptocurrency industry lost its former glory. That year, the FTX exchange he founded hosted a late-night cocktail party on Boca Raton Beach, distributing branded merchandise at a giant booth in the exhibition hall and holding a fireside chat with former baseball star turned businessman Alex Rodriguez (A-Rod). Due to his lavish spending, everyone from U.S. regulators to politicians, and even Tom Brady, was willing to hear his thoughts.

But Duffy was not convinced. This industry veteran, who has long served as the head of the Chicago Mercantile Exchange (CME), began his career in the trading pits of Chicago in the 1980s. He was skeptical of SBF's ambitious plans. FTX aimed to independently handle all client needs in cryptocurrency derivatives, using algorithms instead of brokers to help clear trades.

"I introduced cryptocurrency to the CME in 2017, and at that time, I didn't even know who SBF was," Duffy said in an interview this year. He bluntly stated that SBF's plans were "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 a previous interview with Bloomberg, he recalled that he directly told SBF he was a fraud and claimed that the money in his right pocket was more than the assets of the crypto executive. This claim was validated when FTX filed for bankruptcy at the end of 2022. The bankruptcy case revealed a years-long fraud, with prosecutors stating that SBF had defrauded about $10 billion from clients, investors, and lenders.

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

As a result, some companies proactively scaled back their operations, turning their attention to overseas financial centers like Dubai, Singapore, and Hong Kong. Trading giants Jump and Jane Street reduced their cryptocurrency market-making operations in the U.S. Due to the lack of a clear regulatory framework from Washington, Cboe shut down its cryptocurrency spot trading business.

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 stated that it would not take any enforcement action. At the same time, the SEC also dropped its lawsuit against Coinbase Global Inc., the largest digital asset exchange in the U.S., which had previously accused it of operating an illegal exchange.

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

Elisabeth Kirby, head of market structure at Tradeweb, stated that the rapidly changing regulatory environment is paving the way for institutional investors to engage more deeply in the crypto market. Tradeweb is a company that operates an over-the-counter market covering areas such as interest rates, credit, money markets, equities, and cryptocurrency ETFs.

Banks are also actively positioning themselves to capture more cryptocurrency business. Morgan Stanley, which had previously been inactive in the crypto space, is now paving the way for potential IPO clients. Executives at Bank of America Corp. are discussing whether to further push for trading support for digital asset companies, while the Royal Bank of Canada is seeking to expand more business after completing its first crypto transaction at the end of last year.

At this week's conference, collaboration became the main theme. The core discussion focused on how traditional finance and the crypto industry can work together.

Even Duffy stated that he now supports the success of the crypto industry—after all, last year, the average daily trading volume of digital assets at the CME surged by over 200%, reaching $6.8 billion.

"We launched Bitcoin, then Ethereum, and now we have just announced the launch of Solana," Duffy said. "I hope to see crypto assets become more mainstream."

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