Schwab, Fidelity Said to Team With Market Makers on Crypto-Trading Platform

Schwab, Fidelity Said to Team With Market Makers on Crypto-Trading Platform

A crypto marketplace backed by some of the biggest names in traditional finance could launch in coming months, giving mainstream investors another way of getting in on the relative new asset class.

Though a few details about the venture are available, it could mark a significant step toward mainstreaming crypto trading for retail investors.

Dreamtime

Market makers Citadel Securities and

Virtu Financial

are working with

Charles Schwab

and Fidelity to develop a cryptocurrency trading platform that could roll out later this year or in early 2023, Bloomberg reported, citing anonymous sources.

“Citadel Securities and other industry leaders are working closely together to create a crypto marketplace that is efficient, transparent, and secure, with agreed upon standards and best practices,” a source familiar with Citadel’s plans told Barron’s Advisor.

“This new trading ecosystem will create more efficient access to deep pools of liquidity for digital assets,” the source said.

A Schwab spokeswoman did not comment specifically on the reported initiative but said the company is participating in a new crypto business.

“Schwab has made a minority, passive strategic investment in a new digital asset venture,” the spokeswoman said. “We know there is significant interest in this cryptocurrency space, and we will look to invest in firms and technologies working to offer access with a strong regulatory focus and in a secure environment.”

Virtu did not respond to a request for comment immediately.

A spokeswoman for Fidelity would not confirm it is participating in the venture but reaffirmed the company’s commitment to crypto as an asset class.

“Fidelity supports efforts that further efficiency in the digital assets marketplace and provide more optionality to source liquidity for investors,” the spokeswoman said.

Though a few details about the venture are available, it could mark a significant step toward mainstreaming crypto trading for retail investors. At present, investors typically buy cryptocurrencies either from dedicated exchanges or through upstart brokerage apps like

Robinhood

or web.

Schwab offers investors access to crypto via Bitcoin futures and several crypto-oriented trusts that trade over the counter but does not permit direct trading in cryptocurrencies on its platform.

That’s not going to change with the new venture, at least at first. Schwab says there are no immediate plans to offer direct crypto trading because the company is waiting to see how policy makers ultimately decide how to regulate the sector.

“We recognize that there is considerable interest in cryptocurrencies, particularly in certain segments of the market, and will consider introducing direct access to cryptocurrencies when there is further regulatory clarity,” the Schwab spokeswoman said.

Fidelity has already made waves in the crypto space with the announcement of a plan to offer access to Bitcoin in its 401(k) plans, a move that has drawn scrutiny from regulators wary of the volatility of the asset class.

Fidelity offers retail clients exposure to crypto through thematic exchange-traded funds but, like Schwab, does not offer direct trading of currencies on its platform.

Word of the forthcoming venture comes amid mounting interest in streamlining access to cryptocurrencies, despite the recent tumble the market has taken. On Tuesday, the blockchain platform Paxos said it is launching a crypto-trading platform for broker-dealers, including a set of technology interfaces aimed at making it easy for advisors to trade crypto on behalf of clients.

Interactive Brokers
,

A large online brokerage that provides custody services to financial advisors, is an early partner with Paxos for the platform.

Paxos cited a 2021 survey that found that just 15% of advisors were allocating assets to crypto, but 94% of them had fielded questions from clients about the asset class. That disparity makes sense given the nascent stage of the crypto market, but crypto enthusiasts like Paxos contend that demand will only continue to rise, with investor allocations to follow, and brokers that don’t offer an easy platform to purchase crypto could lose out. “If you’re a broker-dealer, this should be concerning,” Paxos said in a blog post. “Data shows crypto allocations within portfolios could jump to as high as 30% in 2022. If your platform does not include crypto trading for your financial advisors, you may see asset outflows in the near future.”

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