If the news is true, it would be a major blow to Robinhood, and to the cryptocurrency industry as a whole. Bitcoin investors are scrambling to follow suit in their efforts to capitalize on the increasing appetite at the mainstream trading venues.
However, there might be more to the decision than the usual regulatory hurdles the regulators might face. A new report indicates that the U.S. government may be interested in the private financial markets. According to a recent report in RBC Capital Markets, the U.S. could be looking to invest some money in private Wall Street derivatives exchanges, in the hope to develop a new derivatives “fintech” market.
“For the U.S. to get serious about developing a derivatives market, it will have to develop another key industry, say a derivatives market using financial instruments of public utilities, banking organizations, or securities organizations,” RBC’s Joe Weisenthal suggested.
If true- RBC’s report comes as little surprise. Back in February, there was some speculation that the U.S. could establish its very own private cryptocurrency derivative market, in a bid to “clean up” the chaotic ecosystem that has developed as a result of unregulated digital currencies. Weisenthal was quick to debunk this notion, stating, “the U.S. doesn’t have the money to run a Bitcoin derivatives market, not in light of an inability to create real capital… the U.S. is not a major player, not in their own right in the financial markets, nor in their own right with derivatives.”
However, RBC is not the only financial publication to get on board with this potential solution. Marketsin, based in Stockholm, Sweden has also come up with a potential solution, a private derivatives space for crypto-currencies. If approved from the regulatory side, this market seems likely to allow more transparency by allowing banks and securities firms to engage in trading in crypto-trading and not in-finance activity. However, this space of the future must take into account the difficulties of regulation, as the market could be a huge success- both for traders and the regulators.
There are many variables to consider. While Robinhood and Marketsin may both consider the U.S. to be a potential market, RBC only has one report and they have already dropped its proposal. So it is likely we will never see this world-renowned institution develop a proprietary cryptocurrency derivative market. A new market like this could offer investors some more flexibility, as there is less risk of “leakage” in the market. The most logical solution, however, is a government-approved alternative- one that will provide greater liquidity in the event of a crisis.