Susquehanna, Fidelity Could Open the Spigots for Institutional Capital in Cryptocurrency

Susquehanna International Group trades millions of dollars in bitcoin for clients, and now discount broker Fidelity Investments is rumored to be developing a cryptocurrency trading desk. While institutional capital may officially remain sidelined, if you look at the activity of a handful of large financial firms, including the likes of Susquehanna, Fidelity and Goldman Sachs, you wouldn’t know it.

Bart Smith, head of digital assets at Susquehanna, has been making the media rounds, tipping his hand to the expansion plans of the Pennsylvania-based trading firm and his expectations for sidelined capital making its way into the space.

Susquehanna entered the crypto space at the suggestion of Cameron and Tyler Winklevoss, who are deeply engaged in this market. The Pennsylvania-based trading firm boasts private clients of which an undisclosed number trade digital currencies across bitcoin, bitcoin futures and what appears to be a handful altcoins. “We believe that this technology and this asset class is going to change some facet of financial services, and we think it is going to exist forever,” Smith told The New York Times.

Regulation and Infrastructure

But to take cryptocurrency trading to the next level, many are awaiting the arrival of sidelined institutional capital. And before that can happen, two key issues — regulation and trading infrastructure — must mature.

Smith suggested to CNBC that it’s less about the amount of regulation and more about regulatory clarity. “The clarity will allow institutions to come in more than anything else. Institutions don’t like to invest into uncertainty,” he said.

Susquehanna’s Bart Smith on CNBC

Susquehanna has its pulse on the demand among institutions for cryptocurrencies, and he says “there are a lot of conversations,” adding that it’s more difficult to differentiate between immediate and long-term horizon interest. Should the spigot of institutional capital open, Susquehanna’s trading desk is built for it and ready to scale, Smith said, pointing to ERISA and 40-Act assets, which reflect retirement/401(k) and mutual funds.

Incidentally, it was a major development when pension plans started allocating to alternative investments like hedge funds. Eventually, 401(k) and pension investment boards may determine it’s part of their fiduciary responsibility to offer cryptocurrency funds.

Fidelity’s Footprint

The details of Fidelity’s cryptocurrency plans remain vague and appear to be the result of some connecting of the dots more than any formal confirmation like Goldman Sachs eventually made. Fidelity reportedly has several job openings that suggest the discount broker is in the early stages of launching a cryptocurrency trading desk.

Fidelity boasts tens of millions of individual customers, and its support of the cryptocurrency market could open the spigot of another kind — Main Street investors.

Featured image courtesy of Shutterstock. 

Gerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.