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The new owners of The Boca Raton hotel recently spent $200mn on modernising the luxury south Florida resort. 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, chair of the Commodity Futures Trading Commission, summed up the mood, when talking to reporters: “This conference hall was filled with a new set of players a year ago — and now it feels like it kind of went back to where it was a few years ago.”
Last year, FTX chief executive Sam Bankman-Fried — famous for talking to executives and world leaders alike in a T-shirt and shorts — was at the forefront of a crypto-industry takeover of the event, promising 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 a dozen federal charges over 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 smartened up.
“You’re not going to see as many black T-shirts this year,” said FIA president Walt Lukken.
“Even the crypto people are in blazers,” another FIA executive added.
But the renewed formality reflects more than a mere sartorial change. In contrast to FTX’s attempt to rip out 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, chief executive of the 104-year-old brokerage RJ O’Brien. “They’re looking to play by our rules now, rather than disintermediate.”
FTX had proposed replacing brokers such as RJ O’Brien — which are 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, though, crypto brokers Coinbase and Robinhood are trying to become FCMs themselves.
Despite the multiple crises over the past year, most executives in Boca this week suggested crypto still has a future as an important part of financial markets. “I am a big proponent of blockchain,” said CME Group chief executive Terry Duffy, who clashed with Bankman-Fried at the previous conference. He added that “market structure is going to change” as a result of the ledger technology.
An executive at another large exchange highlighted an ongoing appetite among government and central bank officials for creating their own digital currencies. Another added that traditional post-trade systems were likely to become more efficient by “embedding blockchain”. The European Central Bank is among the institutions currently exploring the use of blockchain technologies to underpin market infrastructure.
Leaders at Coinbase — one of few crypto sponsors still at Boca — showed they were willing to join in with some of the jokes: taking part in a panel on rebuilding the crypto industry, wryly titled “back to business casual”. John D’Agostino, senior institutional strategist, quipped about how much he loved banks, urging any bankers in the audience to “call me”.
Again, however, the humour reflected a more substantial issue for many in the crypto industry. After the collapse of Silvergate and Signature, many digital-asset firms were left scrambling to source 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 cause a “flight to quality”, which will make it easier for them to scoop up business from investors wary of crypto-native businesses.
“If you’re [a company like] Goldman Sachs, who do you want to be running crypto businesses in the US?” asked the head of one market maker. “It’s not crypto-native firms. Larger institutions see this as their moment.”
Exchange operator Cboe Group, for example, ramped up its presence at Boca this year, sponsoring several events with a fleet of executives in attendance.
However, some attendees were critical of the event organisers, FIA, and the regulators at the CFTC, for ever taking seriously the hyped-up promises of groups like FTX. Boca is normally the biggest event on the industry calendar, but one executive at a large 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 but a way to drum up funding “to put a curtain over the fraud he was perpetuating”.
Still, even those welcoming the return to normality were keen to learn lessons from the brief disruption. The head of one proprietary trading firm said the crypto influx “got everyone thinking”, prompting more serious discussions of topics such as introducing round-the-clock trading for traditional asset classes.
“What crypto was good at was pushing the envelope,” said an executive from a traditional exchange — noting that the conversation around 24/7 equities trading has ramped up since established names saw the demand in crypto markets. Late last year, CBOE extended trading hours on two more options products to “enable traders to adjust positions around the clock”.
FIA chief Lukken said it was “understandable” that the industry had retreated to more familiar models, but was also keen to keep some of the lessons. “I gave up ties last year,” he pointed out. “I haven’t gone back.”
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