Wall Street firms double down on crypto after SEC sues Binance, Coinbase. Who will win the competition?

By Frances Yue and Anushree Dave

Welcome back to the Distributed Ledger newsletter.

Last week, BlackRock(BLK), the world's largest asset manager, filed an application for a spot bitcoin exchange-traded fund. Following that, WisdomTree(WT) and Invesco(IVZ) this week also re-submitted applications to start spot bitcoin ETFs, after getting rejected by the U.S. Securities and Exchange Commission previously for their earlier applications.

The SEC approved several bitcoin futures-based ETFs in the past, but has yet to greenlight anything that is backed by bitcoin itself.

Meanwhile, a new crypto exchange, called EDX Markets, backed by several Wall Street heavyweights such as Charles Schwab (SCHW), Citadel Securities, Fidelity Digital Assets, Paradigm, Sequoia Capital, Virtu Financial, has started operation.

All these happened after the SEC recently sued both crypto exchanges Binance and Coinbase.

We spoke to Matt Hougan, chief investment officer at Bitwise Asset Management, a crypto asset manager, to discuss what the recent events mean for the crypto industry.

As always, you can find us on Twitter at @anu__dave and @francesyue_ to share any thoughts on crypto, this newsletter, or your personal stories with digital assets.

Wall Street vs. crypto-native firms?

Some market participants are digesting recent speculation that U.S. regulators may be favoring established Wall Street firms while acting against crypto native companies.

"I don't personally subscribe to sort of the deep state theory that regulators are intentionally clearing the pathways to allow institutional players to steal market share in the crypto space," Hougan said in a call.

"I think it's just the case that finance is a heavily regulated industry, and it's hard for disruption to happen in heavily regulated industries everywhere," Hougan said. "So it was always going to be the case that the market was going to feature both crypto native and institutional firms as it became more regulated."

Still, once there is more regulatory clarity, Hougan said he doesn't assume established financial firms will necessarily win the majority of market share.

"Crypto is a very cyclical industry. Many financial advisors want to partner with someone who is focused on this space, whether it's in a boom or bust cycle, and has deep expertise in the space," Hougan said.

Meanwhile, while some of the Wall Street firms have dedicated crypto teams, they are usually relatively small compared to companies specialized in crypto, Hougan noted.

"To be sure, these large players will win market share and they'll also expand the size of the market. But in the asset management space, you've often seen specialized players do well in their niches," Hougan added.

Crypto in a snap

Bitcoin is up 19.48% in the past week, trading at $30,072 on Thursday, according to CoinDesk data. Ether is up 15.57% in the past week, trading at $1,888 on Thursday afternoon, according to CoinDesk data.

-Frances Yue

Biggest gainers  Price        %7-day return 
Pepe             $0.00000166  18.1% 
Radix            $0.071012    10.5% 
Kaspa            $0.02621532  8.5% 
Conflux          $0.264127    6.6% 
Mina Protocol    $0.490163    0.5% 
                              Source: CoinGecko 
Biggest Decliners  Price      %7-day return 
NEO                $8.69      -7.7% 
Kava               $0.904802  -5.4% 
Render             $2.22      -5.2% 
Stacks             $0.813064  -4.5% 
Flow               $0.542883  -4.1% 
                              Source: CoinGecko 

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06-22-23 1436ET

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