German share and securities trading platform Deutsche Boerse is ‘deep at work’ in understanding and possibly implementing Bitcoin into its trading platform, in a move that is beginning to look like one of necessity for large traditional financials trying to keep up. Regardless of negative mainstream press surrounding Bitcoin’s bear market, it should be remembered that the cryptocurrency continues to maintain a market cap of approximately $125B USD (at time of writing). It is little wonder why share and securities platforms across the world continue their serious evaluation and integration attempts in relation to cryptocurrencies: Goldman Sachs is also moving forward with its plans at adding a Bitcoin related security.
It was at a talk on May 23rd given by Deutsche Boerse’s Jeffrey Tessler, the platform’s head of product and core markets, when Tessler noted that it was difficult to run towards cryptocurrencies given the murky regulatory status. In order to keep up with key regional and global rivals it seems as though Deutsche Boerse is left without an option but to press forward with some form of a cryptocurrency option. CME and Cboe Global Markets, both major securities and share platforms, launched their Bitcoin futures late last year in moves that unquestionably drove the entire cryptocurrency market into ‘foaming at the mouth’ levels of ecstasy.
However, it is the growing cloud of regulatory enforcement which is leaving traditional financials cautious. It is little wonder: no major Western country has made meaningful attempts to clarify cryptocurrencies’ status or place in the system. As time presses on and industry builds around cryptocurrency, governments are going to start feeling more and more backed into a corner, unable to restrict without the unpopular possibility damaging local industry.
We may continue to be wading into the unknown, but it is becoming increasingly clear that cryptocurrency is going to be integrated into the wider financial community. It’s a direction no one could have seen a few short years ago, and it’s a direction that appears to be fundamentally against a central thesis of Satoshi’s seminal white paper from 2008: a thesis that rotates around the idea that the current financial system has failed us, and we need a new one.
These continued integrations have positive effects on the market in the sense that adoption increases, and adoption is a key to cryptocurrencies’ future success. The actual use cases for cryptocurrency though may be directly at odds with this quasi-traditional, centralized financial industry’s vision of cryptocurrency as another product. As these major platforms seek regulatory clarity, or rather, as their risk departments eventually concede that the benefit outweighs the regulatory risk, more and more of these major organizations will ‘offer Bitcoin’.
But what is their version of ‘offering Bitcoin’ actually mean? Goldman Sachs rumours that they would be dipping its toes into cryptocurrency were recently confirmed, but in a form that may seem somewhat insincere. These institutions are not offering a real slice of the cryptocurrency pie – real ownership – they are offering a produce they’ve made up that is merely tied to the price of cryptocurrency. The difference is massive, and it is a detail that has arguably led to every financial disaster in recent memory. Certainly, the one that created Satoshi’s vision to begin with.
It is easy to forget the true value of cryptocurrency. The value that is beyond numbers on a screen or Wall Street or the creation of money through an irresponsible subprime mortgage. How is the futures offered by CME, Cboe Global, Goldman, or eventually it seems from Deutsche Boerse going to be any different from the past? Cryptocurrency itself is different. It’s the ground work for a wealth system that extends beyond the current one. For these major financials to simply create a future to sell, a new ‘financial product’ that appears to have less intrinsic value than that of Bitcoin, then on sell it may be only adding to the problem of the traditional financial system.
As stated by Tessler, Deutsche Boerse still apparently needs to evaluate the ‘underlying transaction’ which he states ‘isn’t the easiest thing to do’. In this regard one might assume that Tessler is referring to the decentralized nature of Bitcoin and the possible risk of a 51% attack. It’s an attack that is relatively low risk with a cryptocurrency such as Bitcoin, however, with a coin such as Verge it’s been seen in the past. Although there is no proof that a 51% majority hashing power holder would act maliciously towards the coin’s base, without understanding risks such as this one, one beyond a bank’s control entirely, it is easy to see why Deutsche Boerse may be hesitant to tie a future to what has been a volatile security comparatively.
Featured image from Shutterstock
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Con’s a writer. His education background is law, where he’s published in law journals on the legal issues of crypto-currency. His opinion editorials tend to focus the relationship between people and technology, as well as the societal challenges technology can present. He’s consulted for non-profit privacy and digital rights groups, aiding governmental submissions. His passion is for information security, technology and the intertwining legal issues.