Humble ‘crypto brothers’ don blazers for Boca Raton

The new owners of The Boca Raton hotel recently spent $200 million to modernize the luxury South Florida resort. But for many of the derivatives professionals who gathered there this week for the annual Futures Industry Association conference, walking through the Beach Club felt like stepping back in time.

Rostin Behnam, Chairman of Commodity Futures Trading Commission, summarizing the mood speaking to reporters, “This conference room was filled with a new group of players a year ago — and now it feels like it’s kind of gone back to where it was a few years ago.”

Last year, FTX CEO Sam Bankman-Fried — famous for speaking to executives and world leaders alike in t-shirts and shorts — was at the forefront of a crypto industry takeover of the event, vowing to dismantle traders’ club cadre, Brokers and exchange operators meeting in Boca for almost 50 years.

A year later, with Bankman-Fried facing a dozen federal charges over alleged fraud and markets reacting to the collapse of crypto-focused banks Silvergate and Signature, digital asset evangelists were few and far between in Boca. And the few that remained had become fancier.

“You won’t see that many black T-shirts this year,” said FIA President Walt Lukken.

“Even the crypto people wear blazers,” added another FIA executive.

But the renewed formality reflects more than a mere change in fashion. Contrary to FTX’s attempt to rip out and rebuild the established financial order, crypto firms are now trying to make their businesses look more like those of their older competitors.

“They’re not dead, I see them — some are coming our way,” said Gerry Corcoran, chief executive of 104-year-old brokerage firm RJ O’Brien. “They are now trying to play by our rules instead of turning away.”

FTX had proposed replacing brokers like RJ O’Brien – known as futures commission merchants, or FCMs – with an algorithmic system that would have automatically liquidated investors’ positions if margin levels had fallen too far. Now crypto brokers Coinbase and Robinhood are trying to become FCMs themselves.

Despite the numerous crises over the past year, most executives in Boca hinted this week that crypto still has a future as a key component of financial markets. “I’m a big supporter of Blockchainsaid Terry Duffy, CEO of CME Group, who clashed with Bankman-Fried at the previous conference. He added that “the market structure will change because of ledger technology.”

An executive at another major exchange highlighted the continued appetite of government and central bank officials to create their own digital currencies. Another added that “embedding blockchain” would likely make traditional post-trade systems more efficient. The European Central Bank is among the institutions currently exploring the use of blockchain technologies to support market infrastructure.

Coinbase executives — one of the few crypto sponsors still at Boca — showed they were willing to join in on some of the jokes: They took part in a panel on rebuilding the crypto industry, ironically titled “ Back to Business Casual”. John D’Agostino, senior institutional strategist, joked about how much he loves banks and urged all bankers in the audience to “call me.”

Again, however, the humor reflected a more important issue for many in the crypto industry. After the collapse of Silvergate and Signature, many digital asset companies had to look for new banking providers. Their demise has notably hampered 24/7 payments.

Some of the incumbents, previously fired by fledgling crypto firms, believe the recent disruption will prompt a “flight to quality,” making it easier for them to siphon off deals from investors wary of crypto-native firms .

“If you are [a company like] Goldman Sachs, who do you want to lead in crypto business in the US?” asked the head of a market maker. “They are not crypto-native companies. Bigger institutions see this as their moment.”

Exchange operator Cboe Group, for example, increased its presence at Boca this year, sponsoring several events featuring a fleet of executives.

However, some attendees criticized the event’s organizers, the FIA, and regulators, the CFTC, for forever taking seriously the hyped promises made by groups like FTX. Boca is usually the biggest event on the industry calendar, but an executive at a major traditional exchange said he skipped last year’s event due to the influx of so-called “crypto bros.”

CME’s Duffy said FTX’s plans “blew up the markets” and that Bankman-Fried’s appearance in 2022 was nothing more than a way to raise funds “to cover up the fraud he was continuing.” .

Still, even those who welcomed the return to normal wanted to learn lessons from the brief hiatus. The head of a proprietary trading firm said the crypto influx has “made everyone think” and prompted more serious discussions about issues such as the launch of 24/7 trading for traditional asset classes.

“What crypto was good at was pushing the envelope,” said one executive at a traditional exchange — noting that the conversation about 24/7 stock trading has increased since established names recognized the demand in crypto markets. Late last year, the CBOE extended trading hours for two more options products to “give traders the ability to adjust positions 24/7.”

FIA boss Lukken said it was “understandable” that the industry had retreated to more familiar models, but also wanted to learn some lessons. “I gave up ties last year,” he pointed out. “I didn’t go back.”