Is it good or bad that Wall Street giants are taking over cryptocurrency with ETF and EDX?

Are Wall Street giants dominating cryptocurrency through ETF and EDX a positive or negative development?

Author: Jaleel, BlockBeats / Source: BlockBeats

On June 16, BlackRock applied for a spot bitcoin ETF; on June 20, backed by Citadel Securities, Fidelity Investments, and Jiaxin Wealth Management, the cryptocurrency trading platform EDX Markets went live. In less than a week, two Wall Street giants have entered the heavily regulated cryptocurrency industry. It seems that the positive signals released by these two events have led to a short-term breakthrough in Bitcoin this morning, with Bitcoin breaking through $29,000, now trading at $28,916, an increase of 6.82% in 24 hours.

Although the market reaction is positive, the sentiment in the English-speaking cryptocurrency community does not seem to be the same as the market price.

Five days ago, BlackRock, one of the world’s largest asset management groups, submitted a file application for a spot bitcoin ETF to the SEC through its subsidiary iShares. Most of the English-speaking community believes that this is to drive away native cryptocurrency companies and introduce large traditional companies that partner with the US government to try to control bitcoin and cryptocurrencies.

• Ethereum Inscriptions: Continuation of Bitcoin’s Order or Regression of History?
• Bitcoin returns to $29,000, can the old narrative of institutional entry ignite a new bull market?
• Understanding EDX Markets: 10 questions about behind-the-scenes investors, compliance, and more after a night on the headlines

Subsequently, the new cryptocurrency trading platform EDX Markets, supported by Citadel Securities, Fidelity Investments, and Jiaxin Wealth Management (Charles Schwab), has started trading. At the same time, EDX Markets also announced that its new equity partners have completed a new round of investment, including Miami International Holdings, DV Crypto, GTS, GSR Markets LTD, and HRT Technology.

BlackRock ETF is being criticized

As previously reported by BlockBeats, some cryptocurrency industry practitioners and communities do not seem to support BlackRock’s application for a spot bitcoin ETF. According to the rules of Bitcoin spot ETF, Bitcoin ETF is only an asset that tracks the price of Bitcoin, and investors own Bitcoin fund shares, not Bitcoin directly. This violates the spirit of cryptocurrency to a certain extent: “Your keys, your bitcoin. Not your keys, not your bitcoin.”

Against the backdrop of huge regulatory pressures from the SEC, the US Securities and Exchange Commission recently sued four large cryptocurrency trading platforms, including Gemini, Coinbase, Binance US, and Kraken. This means that they may be under investigation for alleged violations of US securities trading regulations; the Federal Reserve has closed Silvergate Bank and Signature Bank, two well-known banks that provide services to the cryptocurrency business; and the Federal Reserve is deciding whether to approve the relevant requests of two cryptocurrency-friendly banks, Custodia Bank and Protego Trust.

It is very surprising that BlackRock submitted a Bitcoin ETF application at a time when many previous Bitcoin ETF applications have not been approved. Another popular view in the community regarding BlackRock’s spot ETF application is “Operation Chokepoint 2.0,” Wall Street’s attempt to clear out the cryptocurrency industry.

Rumors about US authorities’ desire to strengthen regulation have been increasing since February this year. Firstly, Brian Armstrong, CEO of Coinbase, revealed that there were rumors that the US SEC might ban cryptocurrency collateral services for retail investors. Subsequently, multiple sources claimed that the US Federal Reserve and financial regulatory agencies were taking massive action to put pressure on the banking industry, making it impossible for crypto companies to get bank accounts and severing the connection between cryptocurrency and banks. In March, several US banks were forced to go bankrupt. Afterwards, it was discovered that several of the banks that were liquidated, including Signature Bank, Silicon Valley Bank, and Silvergate Bank, were friendly to the cryptocurrency industry. A large part of Signature Bank’s daily business is related to the cryptocurrency industry.

Well-known KOL AutismCapital (@AutismCapital) on Twitter stated that BlackRock’s decision to launch an ETF under the supervision of the US Securities and Exchange Commission (SEC) under regulatory pressure may indicate that the SEC is conducting a cleanup operation. The goal is to clear out the “low-level scammers” in the cryptocurrency field, making it easier for the “elite giants” of traditional finance in the United States to rebuild a game platform according to their own rules.

Will Clemente (@WClementeIII), co-founder of digital asset research firm ReflexivityRes, believes that if BlackRock’s spot ETF application is approved, “Operation Chokepoint 2.0” is likely to be carefully planned. The aim is to expel native cryptocurrency companies and introduce large traditional companies that have formed partnerships with the US government in an attempt to control Bitcoin and cryptocurrency.

Just as BlackRock’s Bitcoin spot ETF application was widely criticized and accused of driving out native cryptocurrency companies and attempting to control Bitcoin, EDX Markets, a cryptocurrency trading platform backed by Citadel Securities, Fidelity Investments, and JPMorgan Chase, went live, and public opinion escalated into an attack on cryptocurrency trading platforms by Wall Street.

Wall Street Attack on Crypto Trading Platforms?

5 days ago, well-known KOL Hsaka (@HsakaTrades) listed several events in which traditional financial giants entered the cryptocurrency industry, implying the “giant financial” attribute of BlackRock’s application for a Bitcoin ETF:

-The document for BlackRock’s application for a spot Bitcoin ETF;

-Soros Fund Management stated that the time to acquire cryptocurrencies through TardFi has matured;

-Rumors that EDX, a cryptocurrency trading platform supported by Citadel Securities, will go live later this year;

What surprised many people was that the pace at which traditional finance attacked the cryptocurrency industry was so rapid. A few days after Hsaka’s tweet was released, the EDX trading platform announced its launch. Andrew Blockingrish, co-founder of Arch Public, pointed out that in the past 48 hours, trading companies such as BlackRock, Citadel Securities, Fidelity, Jiaxin Wealth Management, WisdomTreeFunds, and Invesco US have all jumped into the cryptocurrency field. And all of this happened 7 days after the SEC sued Coinbase and Binance.

Many people believe that this is the latest evidence that Wall Street has made progress in digital assets during the crypto winter. But Hsaka believes that as the EDX market began to operate, native cryptocurrency trading platforms were overwhelmed by litigation, and fear was created around them. At this time, these traditional trading companies pounced on them like bald eagles.

CEHV partner Adam Cochran (@adamscochran) believes that last week BlackRock, Citadel Securities, Deutsche Bank and Nasdaq all began to enter the cryptocurrency field. They bully participants so that they can get cheap chips. The trajectory of cryptocurrency has never been so clear. Grit Capital CEO Genevieve Roch (@GRDecter) has a similar view: Now we know why the US Securities and Exchange Commission has been cracking down on cryptocurrency trading platforms… This is EDX Markets clearing the way for Citadel Securities’ cryptocurrency trading platform.

The Investor’s Podcast host Preston Pysh (@PrestonPysh): “Sorry, but after watching this, Blackrock, Fidelity, Citadel Securities, Schwab and now Deutsche Bank have all applied for Bitcoin ETFs, spot trading platforms, etc., just a few days after the SEC issued a TRO against Binance and sued Coinbase. How can you not think that the past year has been a huge internal work of coordination between Wall Street parasites and government regulatory agencies so that they can catch up…”

FTX, owned by Sam Bankman-Fried, collapsed in November after its affiliated crypto trading firm, Alameda Research, used billions of dollars worth of customer assets to fund risky trades and venture capital investments.

Following the precedents of FTX’s collapse and Coinbase and Binance’s lawsuits, EDX Markets is very smart to choose to cater to institutional clients in order to avoid confrontation with regulators. It will provide API-based trading access instead of traditional front-end user interfaces. At the same time, EDX Markets will not directly hold client funds, but will manage them through third-party banks and professional custodians. The transfer of funds will not pass through EDX Markets, but will only be completed between relevant service providers. Currently, the four cryptocurrencies offered by EDX Markets (BTC, ETH, LTC, and BCH) have not been recognized by the SEC as securities.

As a non-custodial trading platform, EDX Markets does not directly handle customers’ digital assets or directly serve individual investors. Instead, it expects retail brokers to send orders from investors to its market for buying and selling digital currencies.

According to information displayed on the EDX Markets website, we can see that EDX does not provide direct retail accounts, nor does it allow individuals to join as members, only institutions have the eligibility to apply for EDX membership. This is similar to the operation mode of the stock market. Investors do not directly enter the New York Stock Exchange or Nasdaq, but submit orders through brokerages such as Fidelity and Charles Schwab, further incorporating individual crypto investors into the management portal of traditional financial intermediaries.

LumidaWealth CEO Ram Ahluwalia (@ramahluwalia) believes that EDX may hope to develop into a regulated ATS and eventually become a “national securities trading platform” (think Nasdaq or New York Stock Exchange), which is beneficial to the crypto market. EDX is applying federal securities law to cryptocurrencies and by utilizing third-party banks and cryptocurrency custodians for asset custody, EDX maximizes the reduction of conflicts of interest and prevents asset misuse, as seen in issues such as FTX, Celsius, and DCG/Genesis.

According to the SEC’s lawsuit, Binance’s trading volume surged to $9.58 trillion by 2021, and Binance.US’s revenue exceeded $265 million in 2021. By transaction volume, Binance is the world’s largest cryptocurrency trading platform, and most of its revenue also comes from trading fees. Crypto data analysis tool CryptoQuant also tweeted that Binance’s revenue has grown tenfold over the past two years, achieving revenue of approximately $12 billion in 2022, and OKX’s revenue has grown fourfold over the past two years.

When the world is bright and bustling, everyone seeks profit; when the world is chaotic and tumultuous, everyone seeks profit. As the most profitable business in the cryptocurrency industry, trading platforms naturally have a dazzling attraction. On one side, regulation is clamping down and not letting go; on the other, Wall Street is pushing out the native cryptocurrency factions and attacking cryptocurrency trading platforms. The native players in the cryptocurrency industry will face unprecedented pressure.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!