The cryptocurrency market could get a lot more crowded this year.
According to a survey by Thomson Reuters, approximately 20% of financial institutions could get off the fence and begin cryptocurrency trading in 2018 over different time durations.
Most of the firms that expect to launch cryptocurrency trading this year, or 70%, are keen to do so in the next three-to-six months, according to the survey. Meanwhile, 22% provided a longer-term time horizon of the next six-to-12 months. Thomson Reuters polled more than 400 clients across its trading solutions Eikon, REDI and FX platforms.
The Ethereum Connection
Sam Chadwick, director of strategy and innovation at Thomson Reuters, specializes in the blockchain and took some time to talk with CCN from Zurich, Switzerland.
In 2015, Chadwick was doing his postgraduate Masters at Oxford University. While searching for a dissertation topic, Vitalik Buterin’s paper on Ethereum just happened to come out. He read it and decided to write on the impact of the blockchain on financial services. As fate would have it, Vitalik was only a kilometer away in Switzerland, so Chadwick emailed him and they met up for a coffee at Starbucks. Chadwick says:
“We had a chat for my dissertation on how Thomson Reuters would be impacted by the blockchain and smart contracts. [Buterin] said there would be some disruption of the client base you serve today if it pans out the way we think it will. But smart contracts needed some mechanism of getting off-chain data, like weather, temperature, interest rates and prices of other world assets. That became my thesis.”
Chadwick continues to lead blockchain and cryptocurrency innovation for Thomson Reuters from Zurich. The year after he joined, Thomson Reuters launched BlockOne IQ, which incidentally provides data for JPMorgan and National Bank of Canada’s debt issuance on Quorum.
The Rise of Cryptocurrency Trading
In January 2017, prior to the more recent formal survey, Thomson Reuters’ Chadwick anecdotally polled the firm’s institutional clients about bitcoin and other cryptocurrencies, in response to which Chadwick said he was met with “blank stares.” By year-end 2017, however, when “bitcoin fever” hit, the tide turned. For instance, Thomson Reuters added bitcoin to its desktop platform Eikon as well as on its premium data feed for price discovery.
“That was one year ago. And then coming into the end of last year into Q4, prices of cryptocurrency assets went bananas. Bitcoin started soaring. That landing page we created for bitcoin inside Eikon moved up to be No. 2 of all the FX landing pages after the euro,” explained Chadwick.
While there’s speculation that Goldman Sachs is launching a cryptocurrency trading desk, Chadwick wouldn’t comment on them or the clients that were surveyed given the sensitiveity of the topic, except to say: “It was a combination of the large buy-side organizations — asset managers and hedge funds — as well as some of the bank trading desks.”
He also described the number of ways in which financial institutions more broadly could potentially begin cryptocurrency trading. “Whether they invest in the capabilities, form partnerships or quietly white-label, we don’t know. But there are different ways they .. new product without too much heavy lifting,” said Chadwick.
Rise of the Altcoins?
Chadwick went on to describe the appetite among Thomson Reuters’ clients for cryptocurrencies, which interestingly extends beyond just the top 10 digital currencies.
“One of the questions on our survey was if we were to cover cryptocurrency pricing and trading, which ones would you be interested in? The big ones were named, but then it was interesting to see some of the altcoins that people picked. It drew me to think about whether players are thinking about creating fund offerings in which you’re not 100% to bitcoin or 50/50 bitcoin/Ethereum. But you could actually hold a portfolio of 10-20 coins that would diversify your risk given the fact that these are startups,” explained Chadwick.
The financial institutions that were polled seemed less interested in the privacy coins like Zcash or Monero, which might not pass KYC checks, he explained. But they did request that Thomson Reuters cover ICOs.