Crypto markets need big bank financing and credit

Acquiring backing of a bank with a sizeable balance is more important than custodial services at this stage, says crypto market-maker

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Maxime Boonen: in cryptocurrency markets it’s all about bringing your own financing

The cryptocurrency market needs the backing and financing of a well-established bank to bring the type of funding the burgeoning asset class needs to attract a wider set of institutional players and come into its own, the two chief executives taking part in a fireside chat said at the 17th annual FX Week Europe conference in London.

Maxime Boonen, director and founder of B2C2, a digital asset market-maker, pointed out that the colossal infrastructure that underpins most asset classes in financial markets just does not exist in the digital asset world.

The financing and credit infrastructure that is a necessity for maintaining trading positions in the foreign exchange market is just not there for market participants in the cryptocurrency market.

“In cryptos, it’s bring your own financing,” said Boonen. “It’s really difficult.”

“Retail brokers want to trade cryptos as if it were EUR/USD or USD/JPY,” he said. “We try to intermediate as best we can to give them the biggest net open position as possible.”

“We need the emergence of an FX swap market of sorts [in the crypto space] before it takes off,” emphasised Boonen.

For him, obtaining reliable and abundant financing is a prerequisite for the digital asset market to mature and attract the next tier of market participants. According to Boonen, it is perhaps the most important factor holding back the wider participation of financial institutions in cryptocurrencies.

Everyone talks about custody, but financing in crypto markets is much more important
Maxime Boonen, B2C2

“Everyone talks about custody, but financing in crypto markets is much more important,” Boonen remarked.

David Mercer, chief executive of LMAX Exchange, concurred with that assessment. The founder of institutional cryptocurrency exchange LMAX Digital said that the digital asset marketplace needs proper banking to provide the backing it needs to flourish.  

“With proper banking comes credit, comes clearing, comes settlement [and] comes trust,” said Mercer.

“[At the moment] we have absolutely zero trust. We spend our lives chasing coins and dollars around the world from one CCC-rated bank to another DDD-rated bank. We need someone to come in and bank the institutions that are already in play.”

With the backing of an established bank with a sizeable balance sheet Mercer believes that the participation of financial institutions in the cryptocurrency markets will expand rapidly.

“With that, all of a sudden you could see this whole market explode,” Mercer said.

“And I really mean explode because all the other bank players will come and the pension funds will be happy to send money to that bank… all of sudden you’ll have credit in the marketplace and all of the plumbing will work better.”

“At the moment we spend half our lives chasing 100 bitcoins around the planet. It’s nonsensical,” Mercer concluded.   

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