Trump helps Wall Street: Make Crypto Great Again?

Traditional finance and the crypto industry will go hand in hand.

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

At the time, this confrontation not only highlighted the deep doubts of traditional Wall Street about the new forces in the crypto industry, but also revealed the ambition of the crypto giant 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 now in the past.

This year, just as the executives of the world's largest exchanges and crypto companies were preparing to go to Florida to attend the futures industry conference, US President Donald Trump announced that he would establish a strategic Bitcoin reserve. Although the move is more symbolic, it undoubtedly further establishes 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 start deeper cooperation.

This change in mood and atmosphere was vividly demonstrated at this week's conference. The conference was held at the Boca Raton Hotel, where traditional financial executives and crypto industry practitioners gathered together to communicate with each other. As for the most obvious difference, it is that almost everyone wore a suit this time, or at least a collared shirt. 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 links have a sense of old money. Cheap Trick, a legendary rock band from the 1970s, performed on stage to cheer up the audience - remember, the audience was filled with financial giants like Lynn Martin, president of the New York Stock Exchange, and Don Wilson, founder of DRW Holdings.

Crypto is back. Catherine Clay, head of derivatives at Cboe Global Markets, a Chicago options giant, 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 crypto capital of the world, 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 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 make a big move into the crypto space. Jeanine Hightower-Sellitto, chief business and strategy officer at EDX Markets LLC, a digital asset company backed by Citadel Securities, said in an interview that market sentiment has shifted dramatically over the past two and a half months, especially since the presidential 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 crypto company Digital Asset, said that 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 reputation as a voice for 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 said bluntly 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 said that he had more money in his right pocket than the assets of the cryptocurrency executive. This statement was confirmed when FTX filed for bankruptcy at the end of 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 collapsed, regulators under the leadership of US President Joe Biden launched a massive crackdown on the cryptocurrency industry. The Commodity Futures Trading Commission (CFTC), the top derivatives regulator in the United States, 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 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 CoinbaseGlobal 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.

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

Banks are also actively planning 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. Bank of America Corp. executives are discussing whether to further promote trading support for digital asset companies, while Royal Bank of Canada is looking to expand more business after completing its first crypto transaction late last year.

At this week's conference, cooperation became the main theme. The core of the discussion focused on how traditional finance and the crypto industry can go hand in hand.

Even Duffy said that he now supports the success of the crypto industry - after all, the average daily trading volume of digital assets on the Chicago Mercantile Exchange (CME) soared by more than 200% last year, with a trading volume of $6.8 billion.

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