Humble ‘crypto bros’ don blazers for Boca Raton

The new owners of The Boca Raton hotel recently spent $200 million to modernize the luxury resort in South Florida. But for many of the derivatives specialists 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 the Commodity Futures Trading Commission, summed up the mood when speaking to reporters: “This conference room was filled with a new set of players a year ago – and now it feels like it’s gone back to where it was a few years ago since.”

Last year, FTX CEO Sam Bankman-Fried – known for speaking to executives and world leaders in both T-shirt and shorts – spearheaded a crypto industry takeover of the event, vowing to dismantle the club cadre of traders. , brokers and stock operators who have been meeting in Boca for nearly 50 years.

A year later, with Bankman-Fried facing a dozen federal charges for 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 who remained had become smart.

“You’re not going to see that many black T-shirts this year,” said FIA president Walt Lukken.

“Even the crypto people are in blazers,” another FIA chief added.

But the renewed formality reflects more than just a sartorial change. In contrast to FTX’s attempt to uproot 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 more in our direction,” said Gerry Corcoran, managing director of 104-year-old brokerage RJ O’Brien. “They’re looking to play by our rules now, rather than being intermediate.”

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

Despite the many crises of the past year, most executives in Boca suggested this week that crypto still has a future as an important part of the financial markets. “I’m a big proponent of blockchain,” said CME Group CEO Terry Duffy, who clashed with Bankman-Fried at the previous conference. He added that “the market structure is going to change” as a result of financial technology.

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

Executives at Coinbase — one of the few crypto sponsors still with Boca — showed they were willing to be in on some of the jokes: participating in a panel on rebuilding the crypto industry, slyly titled “back to business casual.” John D’Agostino, senior institutional strategist, joked about how much he loved banks, urging any bankers in the audience to “call me.”

Again, however, the humor reflected a more significant issue for many in the crypto industry. After the collapse of Silvergate and Signature, many digital asset firms left to find new banking providers. Their decline has particularly hampered round-the-clock payments.

Some of the established institutions that had previously been dismissed by young crypto firms believe the recent disruption will lead to a “flight to quality”, which will make it easier for them to obtain business from investors wary of crypto-native businesses.

“If you are [a company like] Goldman Sachs, who do you want to do crypto business in the US?” asked the head of a market maker. “There are not crypto-native firms. Larger 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 participants were critical of event organizers, the FIA, and regulators at the CFTC, for always taking seriously the hyped promises of groups like FTX. Boca is normally the biggest event on the industry calendar, but an executive at a major traditional exchange said he had skipped last year’s event because of the influx of so-called “crypto bros”.

CME’s Duffy said FTX’s plans “would have blown up the markets” and Bankman-Fried’s appearance in 2022 was nothing more than a way to drum up funding “to put a curtain on the fraud he continued”.

Still, even those who wanted the return to normalcy were welcome to learn from the brief disruption. The head of a proprietary trading firm said the crypto influx “made everyone think”, leading to more serious discussions on topics such as introducing 24/7 trading to traditional asset classes.

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

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