Banks Are ‘Very Far Away’ From Trading Crypto, Genesis CEO Says

(Bloomberg) -- Banks won't be embracing Bitcoin with the same level of enthusiasm that individual investors have exhibited any time soon, the head of crypto prime brokerage Genesis Global Trading said, thanks to continued bearish sentiment from regulators on digital assets.

Addressing the Bitcoin faithful in Miami, Genesis Chief Executive Michael Moro said banks have so far been mostly limited to taking a hands-off approach to the sector such as investing in crypto startups or derivatives products.

“It is their best attempt at a proxy for participation in Bitcoin: For one, to make it look like they're actually doing something,” Moro said on a panel at the Bitcoin 2022 conference on Wednesday. “But two, more importantly, their regulators at the bank-regulator level are looking over their shoulder everything that they're doing. They are very, very far away from being able to trade actual Bitcoin.”

Institutional adoption of cryptocurrencies has been steadily growing since late 2020, with banks including Goldman Sachs Group Inc. revealing crypto options trading for their clients in recent months. The U.S. Securities and Exchange Commission approved a Bitcoin-linked futures product for the first time in October, but has continued to reject requests by banks and hedge funds to offer similar products tied to crypto spot prices.

Banks also say they are prevented from custodying their own cryptocurrency holdings, leading some such as Standard Chartered Plc. to set up off-shoot units that can handle tokens directly.

Moro said products which are cash-settled or offer synthetic exposure to Bitcoin are simply a “safer way” for banks to tell regulators that they're not touching crypto, while still providing the access to digital markets that their clients are asking for.

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Jenna Wright, managing director of institutional crypto exchange LMAX Digital, said on the same panel that the London-based firm is going to launch a cash-settled derivative for its 35 bank clients, who want to trade the market but are restricted by existing regulation.

“You've got an opportunity to use the best of both worlds,” Wright said. “But these guys need to wise up a little bit, the banks, because they're very much used to a five-day-week market. We've been in crypto for a number of years now, and that's not how it works.”