The face of the digital currency marketplace changed completely when CME and Cboe launched their Bitcoin futures products and platforms. Since then, some experts speculated that they would have a stabilizing effect on Bitcoin and the rest of the market, while others have speculated that whales are benefiting from them when manipulating the market. While the jury is still out on both positions, the one clear outcome is that they have sparked new competition from companies looking to sell their own cryptocurrency derivatives, and SBI is the latest participant in this race.
SBI Holdings (SBHGF) is a publicly traded financial services company with a market cap of $6.11 billion. They have invested 1 billion yen ($9 million USD) into Clear Markets to develop a cryptocurrency derivatives trading platform targeted at institutional investors.
According to Nikkei Asian Review, SBI Crypto Investment now owns a 12% minority stake in Clear Markets, headquartered in Charlotte, NC with branches in New York, London and Tokyo. As part of the deal, the companies will build a derivatives exchange where institutional investors may trade instruments pegged to the price movements of Bitcoin and other digital assets. These financial products may include futures, options and swaps that institutional investors may use to hedge their positions in the digital marketplace.
Besides Cboe and CME, other platforms like LedgerX offer crypto-derivatives to institutional investors, including calls, puts and day-ahead swaps. While the functionality is there, LedgerX has not been able to attract the volume of trades that SBI would see as meaningful.
With the addition of SBI’s new derivative products to the market, as well as the latest round of cryptocurrency custody services, institutions may become comfortable with making sizable investments where exposure to cryptocurrencies is more attractive.
Before this announcement, SBI became the first institution to directly launch a cryptocurrency exchange. Their platform, VCTRADE accepts retail investors from Japan. The project was two years in the making, after overcoming a number of delays. Over 20,000 people pre-registered for the exchange during its alpha launch in 2017, and are able to trade Ripple (XRP), Bitcoin Cash (BCH) and Bitcoin (BTC).
VCTRADE is licensed with the Financial Services Agency (FSA) in Japan, and cited a $530 million hack of Coincheck, also in Japan, when it delayed its launch to fortify security measures.
In addition to these projects, SBI led funding rounds for the development of other cryptocurrency exchanges, including bitFlyer and Kraken. In Japan’s regulatory crackdown in June, the FSA determined that bitFlyer had not created effective systems to “ensure proper and reliable operation of the business, as well as countermeasures against money laundering and terrorist financing.” This was followed by the company’s voluntary pause in accepting new customers in order to review their ID verification process for existing customers. Along similar lines, it was rumored that Kraken would pursue SEC registration in May, around the time that it hired the Bush Administration’s prosecutor as its general council.
SBI is making big moves in the cryptocurrency marketplace, but it does not appear to be focused on one particular sector. The company is backing several different exchanges, is launching a derivatives platform and is even dabbling in an AI startup, AntWorks. It appears that they are looking to cast a wide net in the digital currency and technology space, and will make future moves based on the outcomes of these various projects.