Financial institutions ramp up crypto services

Global capital market exchange Deutsche Börse has added more crypto investing options just a week after Goldman Sachs announced the reopening of its crypto trading services to meet surging institutional demand, per Finextra. After launching the world’s first centrally cleared Bitcoin exchange-traded note (ETN) last June, Deutsche Börse has now added Ethereum and Bitcoin Cash ETNs. Goldman Sachs, meanwhile, has opened institutional access to Bitcoin futures and nondeliverable forwards, with plans to add a Bitcoin exchange-traded fund.

The incumbents aim to offer institutions safe access to crypto-based complex financial instruments. Deutsche Börse’s exchange, Xetra, comes with a regulated centralized clearing, meaning investors can rely on significantly reduced risks during transaction settlement and don’t need a separate crypto wallet, unlike with crypto exchanges, providing investors with the same level of institutional-grade trading services as for other types of assets. In addition, Deutsche Börse and Goldman Sachs are offering access to more complex financial instruments than just direct investment in cryptocurrencies: ETNs are debt securities that track the performance of underlying reference indices, such as cryptos, while Goldman Sachs’ nondeliverable forwards allow investors to take a view on Bitcoin’s projected future price. This can be especially attractive to institutional investors wishing to take riskier positions in the volatile asset class to turbocharge their gains: Cryptocurrencies are the best-performing asset class in the last decade.

The services come as more institutional investors actively seek crypto exposure, making such trading services increasingly table stakes among incumbents. Institutional investors aren’t waiting on incumbents to catch up to invest: Crypto-native exchange Coinbase grew its total institutional assets to $45 billion in 2020, up from $6 billion in April, while crypto asset manager Grayscale now manages $30.4 billion, from just $2 billion in January 2020. So, it’s no surprise that 40% of Goldman Sachs’ clients alone already have exposure to cryptos, and the Wall Street giant is likely trying to bring this business in-house. With the introduction of these services, Goldman Sachs and Deutsche Börse join fellow incumbents, such as Fidelity and BlackRock, in scrambling to meet client demand and grab a piece of this fast-growing multibillion-dollar market, per Insider Intelligence forecasts.