The explosive growth of Bitcoin and the overall crypto market has swayed some of the biggest Wall Street banking giants in recent times. As per the latest report by Forbes, Wall Street banking giant JPMorgan is preparing for Bitcoin (BTC) and crypto clearinghouse options.
While the crypto market has registered unprecedented growth over the last decade, it still remains relatively immature. Before making any trades, traders still need to deposit funds with over-the-counter (OTC) trading desks and exchanges. This brings additional risks for the traders while the OTC desks are forced to look after the crypto custody.
The clearinghouse options will serve as a middleman between traders and OTC desks. These clearinghouses will ensure the enforcement of trade while creating liquidity in the market. Besides, if either party defaults, the house guarantees payments while ensuring that trading desks are able to handle the orders.
Speaking to Forbes, a JPMorgan senior executive said:
“We will fundamentally need a crypto clearinghouse to see that liquidity. Once that exists, banks will move their liquidity to it. Cryptocurrency brokers and exchanges need to avoid the kind of liquidity problems that trading app Robinhood ran into”.
Learning from Robinhood’s Recent GameStop Event
Last month, one of the most-popular stock trading platforms Robinhood was forced to stop trading during the GameStop mania at Wall Street. Robinhood had to face massive flak from retail investors over this matter. Things escalated to the levels that even the top regulators of America had to intervene.
With the crypto market getting mature every passing day, the crypto trading volumes have also spiked up. Also, with institutional products like Bitcoin futures, options and ETFs coming to the market, trading at OTC desks is likely to surge further from here.
While banks like Goldman Sachs and other have already started their crypto trading desks, a proper clearinghouse was still missing. Hopefully, JPMorgan can fill this void ahead!