The new owners of the Boca Raton hotel recently spent $200mn modernizing the luxury South Florida resort. But for the many derivatives experts who gathered there this week for the annual Futures Industry Association conference, walking past the Beach Club felt like stepping back in time.
Commodity Futures Trading Commission chairman, Rostin Behnum, summed up the mood when speaking to reporters: “This conference hall was full of a new set of players a year ago — and now it looks like that’s kind of where it’s gone back to. It was a few years ago.”
Last year, FTX chief executive 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 that promised to dismantle the clubby cadre of traders. , brokers and exchange operators who have been meeting in Boca for almost 50 years.
A year later, with Bankman-Fried facing dozens of federal charges over alleged fraud, and markets reacting to the collapse of crypto-focused banks SilverGate and Signature, Boca had few digital-asset evangelists. And the few that remained had become smart.
“You’re not going to see that many black T-shirts this year,” said FIA president Walt Lueken.
“Crypto people are also in blazers,” added another FIA executive.
But the re-formalization reflects more than just an ironic shift. Unlike FTX’s attempt to dismantle and rebuild the established financial system, crypto companies are now trying to make their businesses look like their older competitors.
“They’re not dead, I see them — some are coming more in our direction,” said Gary Corcoran, chief executive of 104-year-old brokerage RJ O’Brien. “They’re now looking to play by our rules instead of decommissioning.”
FTX proposed replacing brokers like RJ O’Brien — known as futures commission merchants, or FCMs — with an algorithmic system that would automatically liquidate investors’ positions when margin levels fall too low. Now, however, crypto brokers Coinbase and Robinhood are trying to become FCMs themselves.
Despite multiple crises over the past year, most Boca executives this week suggested that crypto still has a future as an important part of financial markets. “I’m a big advocate of blockchain,” CME Group Chief Executive Terry Duffy said, clashing with Bankman-Fried at an earlier conference. He added that ledger technology will “change the structure of the market” as a result.
An executive at another major exchange highlighted the ongoing appetite among government and central bank officials to create their own digital currencies. Another adds that traditional post-trade systems are likely to be made more efficient by “blockchain embedding”. The European Central Bank is one of the institutions currently exploring the use of blockchain technology to underpin market infrastructure.
Leaders at Coinbase – one of the few crypto sponsors still at Boca – showed they were willing to join in with some jokes: participating in a panel on rebuilding the crypto industry, titled “Back to Business Casual.” Senior institutional strategist John D’Agostino urged any bankers in the audience to “call me,” quipping about how much he loves banks.
Again, however, the humor reflects a more significant issue for many in the crypto industry. After the collapse of Silvergate and Signature, many digital-asset firms scrambled to acquire new banking providers. Their decline has particularly hampered round-the-clock payments.
Some established institutions previously dismissed by young crypto firms believe the recent disruption will cause a “flight to quality,” making it easier for them to get business from investors wary of crypto-native businesses.
“If you are [a company like] Goldman Sachs, who do you want running crypto businesses in the US?” asked the head of one market maker. “They are not crypto-native companies. The big institutions see this as their moment.
Exchange operator Cboe Group, for example, increased its presence at Boca this year, sponsoring several events with a fleet of executives in attendance.
However, some attendees criticized the organizers of the event, the FIA and regulators at the CFTC, for taking the famous promises of groups like FTX seriously. Boca is usually the biggest event on the industry calendar, but an executive at a major traditional exchange said it skipped last year’s event because of an influx of so-called “crypto bros.”
CME’s Duffy said FTX’s plans would “blow up the markets” and Bankman-Fried’s appearance in 2022 was a way to raise funds “to cover up the fraud he was running”.
Still, even those who welcomed a return to normalcy were eager to learn lessons from the brief disruption. The head of a proprietary trading firm said the crypto influx “got everyone thinking”, prompting more serious discussions of topics such as the introduction of round-the-clock trading for traditional asset classes.
“Crypto was pushing the envelope of what was good,” said one executive at a traditional exchange — noting that the conversation around 24/7 equity trading has grown since established names in crypto markets saw demand. Late last year, the CBOE extended trading hours on two more options products to “enable traders to adjust positions around the clock.”
FIA chief Luken said it was “understandable” that the industry was retreating to more familiar models, but was also keen to learn some lessons. “I gave up relationships last year,” he pointed out. “I didn’t go back.”