B2C2 Coindesk
Webinar Summary

B2C2 Coindesk
Webinar Summary

Can crypto asset trading benefit from better infrastructure without giving up everything that makes it revolutionary in the first place?

Can crypto asset trading benefit from better infrastructure without giving up everything that makes it revolutionary in the first place?

May 16, 2018

May 16, 2018

This was the big question when B2C2 founder Max Boonen joined Phil Gillespie, the CEO of B2C2 Japan, and Zane Tackett, B2C2’s Head of OTC Sales, for a Coindesk Webinar earlier this year.

This was the big question when B2C2 founder Max Boonen joined Phil Gillespie, the CEO of B2C2 Japan, and Zane Tackett, B2C2’s Head of OTC Sales, for a Coindesk Webinar earlier this year.

Their wide-ranging conversation—the first in a new series from Coindesk—analyzed the present state of cryptocurrency markets and offered a glimpse into their future. “More and more players are coming in because we’ve hit that critical mass,” Gillespie said. This growth in transforming the market has been faster than many exchanges can handle. Some exchanges have experienced long outages. Others have had to turn off new-user registrations.
 
“The exchanges have definitely been stressed,” Gillespie said. “More and more people are starting to go to the lower-risk and higher-service model of dealing with OTC desks.”
 
OTC desks, like B2C2’s, offer clients services like round-the-clock liquidity, short selling, and post-trade settlement. “People who are more accustomed to interacting with traditional financial markets can easily connect to our OTC platform and trade,” Tackett said. “B2C2 only started getting involved in OTC at the beginning of the year, and the growth in volume we’ve seen has been staggering.”
 
Better infrastructure is making cryptocurrency markets more attractive to financial institutions that previously avoided them, due to excessive risk. “The direction is toward the major asset managers, the banks,” Boonen said. “Banks have been around a long time,” Boonen said, “and the fact they’ve been around so long suggests to me that banks have some function to play.”
 
Some have worried that centralization will undermine the decentralized qualities that make cryptocurrencies unique in the first place. Boonen, a former fixed income trader at Goldman Sachs, doesn’t think it will be much of a problem, however.
 
“You’re always going to have one part of the market that’s more decentralized and another part that’s more centralized,” he explained. “We can still have decentralized peer-to-peer value transfer even if you have a part of the market that is very centralized.”
 
What’s more, financial institutions can benefit all cryptocurrency players by bringing stability and credibility to the markets. “It’s much more difficult to say we’re going to shut down Bitcoin when large institutions are generating revenue and are serving customers,” Boonen said. Cryptocurrency markets have become much more “resilient,” according to Tackett: “Back in the day, someone would put out a bad tweet and the price would dive.”
 
Despite recent advances, more infrastructure is still needed. “We need to basically play catch-up to other asset classes,” Gillespie said. Boonen feels the market needs to develop better tools for managing credit risk. “The absence of credit-risk mitigation mechanisms is keeping the market back,” he said. “We need professionals to take care of the infrastructure.”
 
Regulation can also play a positive role. “We are running into the reasons why a lot of regulations exist,” Tackett said. Japan’s 16 government-registered cryptocurrency exchanges recently established a self-regulatory body after hackers stole $530 million from Coincheck in January—a move that both Boonen and Gillespie praised.
 
“Regulators are not just there to prevent people from doing things,” Boonen said. “At the end of the day, they follow quite closely their mandates of protecting the population and making markets fair and accessible.”
 
While questions remain about how cryptocurrency markets will develop, to veterans of the financial industry, the crypto landscape is not as unfamiliar as it sometimes seems. “It’s kind of like the rebirth of what everyone went through 20 or 30 years ago in electronic FX trading,” Gillespie said. “At the end of the day, when it comes down to the real trading, the concepts are all the same.”

Their wide-ranging conversation—the first in a new series from Coindesk—analyzed the present state of cryptocurrency markets and offered a glimpse into their future. “More and more players are coming in because we’ve hit that critical mass,” Gillespie said. This growth in transforming the market has been faster than many exchanges can handle. Some exchanges have experienced long outages. Others have had to turn off new-user registrations.
 
“The exchanges have definitely been stressed,” Gillespie said. “More and more people are starting to go to the lower-risk and higher-service model of dealing with OTC desks.”
 
OTC desks, like B2C2’s, offer clients services like round-the-clock liquidity, short selling, and post-trade settlement. “People who are more accustomed to interacting with traditional financial markets can easily connect to our OTC platform and trade,” Tackett said. “B2C2 only started getting involved in OTC at the beginning of the year, and the growth in volume we’ve seen has been staggering.”
 
Better infrastructure is making cryptocurrency markets more attractive to financial institutions that previously avoided them, due to excessive risk. “The direction is toward the major asset managers, the banks,” Boonen said. “Banks have been around a long time,” Boonen said, “and the fact they’ve been around so long suggests to me that banks have some function to play.”
 
Some have worried that centralization will undermine the decentralized qualities that make cryptocurrencies unique in the first place. Boonen, a former fixed income trader at Goldman Sachs, doesn’t think it will be much of a problem, however.
 
“You’re always going to have one part of the market that’s more decentralized and another part that’s more centralized,” he explained. “We can still have decentralized peer-to-peer value transfer even if you have a part of the market that is very centralized.”
 
What’s more, financial institutions can benefit all cryptocurrency players by bringing stability and credibility to the markets. “It’s much more difficult to say we’re going to shut down Bitcoin when large institutions are generating revenue and are serving customers,” Boonen said. Cryptocurrency markets have become much more “resilient,” according to Tackett: “Back in the day, someone would put out a bad tweet and the price would dive.”
 
Despite recent advances, more infrastructure is still needed. “We need to basically play catch-up to other asset classes,” Gillespie said. Boonen feels the market needs to develop better tools for managing credit risk. “The absence of credit-risk mitigation mechanisms is keeping the market back,” he said. “We need professionals to take care of the infrastructure.”
 
Regulation can also play a positive role. “We are running into the reasons why a lot of regulations exist,” Tackett said. Japan’s 16 government-registered cryptocurrency exchanges recently established a self-regulatory body after hackers stole $530 million from Coincheck in January—a move that both Boonen and Gillespie praised.
 
“Regulators are not just there to prevent people from doing things,” Boonen said. “At the end of the day, they follow quite closely their mandates of protecting the population and making markets fair and accessible.”
 
While questions remain about how cryptocurrency markets will develop, to veterans of the financial industry, the crypto landscape is not as unfamiliar as it sometimes seems. “It’s kind of like the rebirth of what everyone went through 20 or 30 years ago in electronic FX trading,” Gillespie said. “At the end of the day, when it comes down to the real trading, the concepts are all the same.”

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