State Street, one of the world’s largest asset managers, has joined forces with a London start-up to bring cryptocurrency trading to investment banks.
Pure Markets, founded by two former currency traders, expects to go live this year with an over-the-counter trading venue that allows investment banks to buy and sell cryptocurrencies bilaterally in the same way as most foreign exchange markets.
Institutional demand for digital currencies such as bitcoin has rocketed, but strict “know your customer” and money laundering regulations make it difficult for large institutions to buy directly into the asset class.
Instead, many have bought exposure through derivatives and exchange-traded funds. Bitcoin’s price has soared to $56,000 in the past 12 months as mainstream investors, such as Microstrategy, a listed business intelligence company, have become involved.
State Street has agreed to provide its Currenex trading technology to Pure Markets to create the world’s first liquid, over-the-counter wholesale cryptoexchange, branded Pure Digital.
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Pure Markets expects to announce further partnerships to provide custodian banking facilities, credit risk transfer and market data. The new trading venue will be different from Coinbase and other cryptocurrency exchanges, which are aimed at retail and specialist institutional investors and do not offer complete transparency about who ultimately sits on each side of the trade.
It hopes to create a liquid market that sets the benchmark price for a wide range of cryptocurrencies, stablecoins and central bank digital currencies. At the moment, bitcoin is priced differently on various exchanges, providing arbitrage opportunities.
