|Dutch ETF Group Flow Traders Enters Crypto Market|
Amsterdam-based Flow Traders, Europe’s main exchange-traded funds (ETF) provider, has decided to enter the crypto market defying risk warnings from the Dutch Authority for the Financial Markets (AFM).
Flow Traders co-CEO Dennis Dijkstra said in a Bloomberg interview on Thursday that the firm has expanded its trading products to exchange-traded notes (ETNs) based on Bitcoin (BTC) and Ethereum (ETH). Dijkstra said Flow Traders is hedging its trades of crypto notes with futures contracts run by CME Group (NASDAQ:CME) and Cboe Global Markets, but declined to reveal whether the company is also using the underlying cryptocurrencies to hedge.
The disclosure makes Flow Traders the first firm to publicly acknowledge that it is actively trading crypto ETNs on regulated stock exchanges. This possibly serves as a vote of confidence in the virtual currency market and is significant for the future of institutional investment in crypto.
“People underestimate crypto. It’s big, and it is to be regulated very soon. The market participants are much more professional than people think. Institutional investors are interested — we know they are because we get requests,” Dijkstra stated.
Until recently, financial institutions viewed cryptocurrencies as an untouchable asset. For the most part, that’s still the case. However, the launch of Bitcoin futures by CBOE and CME put the cryptocurrency world on the launchpad to mainstream status.
Flow Traders is joining other major financial institutions making a foray into
the cryptocurrency space. In May, Goldman Sachs (NYSE:GS), one of the largest investment banks in the world, started trading derivatives based on Bitcoin. UK banking giant Barclays (LON:BARC) has also recently been rumored to be setting up a digital-asset trading desk. While CEO Jes Staley, rebuffed the speculation, he acknowledged that the lender was looking into virtual currency trading and other blockchain-related opportunities.
Dutch authorities have taken a negative stance towards crypto, with the AFM releasing a statement where it described it as “prone to abuse” and “not an asset class.”
“We discourage activities in cryptos both by consumers and professional license holders,” Nienke Torensma, a spokeswoman for the AFM said, as quoted by Bloomberg. “By virtue of its newness and the anonymity it potentially offers, it is very prone to abuse. Given its inability to serve the promised purpose as a currency, we don't regard it to be an asset class.”
Despite the regulator’s warnings, Flow Traders or any other firm in the country cannot be stopped from trading regulated crypto instruments on regulated exchanges, as there is currently no legal basis for such a restriction.