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“Bitcoin’s rally is part of a larger trend signaling a shift towards bitcoin as a distinctly strong and established store of value,” one investor said.

Eight Roads Ventures, a Fidelity-backed investment firm that manages assets worth over $11 billion, hired Nao Kitazawa, former CEO of Coinbase Japan, as a venture partner.

Kitazawa joined Eight Roads “to pursue my love for fintech and web3,” he said in a recent LinkedIn post. “It’s an honor to be a part of a firm with a successful track record of backing some of the world’s most innovative and disruptive companies.”

He left Coinbase Japan in February of this year after working at the company for nearly five years. Coinbase announced it was exiting Japan at the time, citing “market conditions.”

Fidelity’s push into crypto

Kitazawa’s appointment comes as Fidelity appears to be further spreading its wings into crypto. Earlier this week, EDX Markets, a Fidelity-backed crypto exchange, announced it was launching operations despite a regulatory crackdown by the United States Securities and Exchange Commission and bearish market conditions.

Earlier this year, Fidelity’s crypto arm, Fidelity Digital Assets, quietly launched its platform, allowing millions of users to trade bitcoin and ether commission-free. Fidelity is also building out a dedicated crypto research team, as The Block reported recently.

As for Eight Roads, the venture firm is an investor in several crypto startups, including Fireblocks and Kaiko, according to The Block Pro’s Deals Dashboard. Kitazawa is reportedly expected to “add immense value to the firm’s portfolio.”

Eight Roads, formerly known as Fidelity Ventures, started investing out of Boston in 1969. Today it has investment teams across Asia, Europe and the U.S. Last year, The firm launched a $350 million technology investment fund for China, as well as a $250 million healthcare and life sciences fund for India.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

CACEIS, Crédit Agricole and Santander’s asset servicing arm, has gained approval to provide crypto custody services by French regulators.

The asset servicing bank was registered by France’s Financial Markets Authority (AMF) on Tuesday June 20, according to the regulator’s website. The news was first reported by CoinDesk.

France is recognized as having one of the most advanced regulatory frameworks in Europe, and CACEIS joins other traditional finance firms such as Societe Generale’s Forge and AXA Investment Managers in being registered in the nation.

The news comes as the EU prepares to impose new crypto licensing rules known as MiCA, which will open its doors for registration in 2024.

Figures from December 2021 show that CACEIS has €4.6 trillion ($5.06 trillion) in assets under custody, and €2.4 trillion ($2.64 trillion) under administration. Plus, it is 69.5% owned by Crédit Agricole and 30.5% owned by Banco Santander.

Building a crypto custody solution

Sources in 2021 claimed that CACEIS was in the process of building a cryptocurrency custody solution.

“CACEIS are looking for something which is quite integrated, and they are not looking for something which is just addressing the custody piece, but something that is comprehensive and addressing various needs,” a source told CoinDesk in 2021.

Registration with the AMF is required for crypto-related services such as custody, exchange, or trading in France.

Binance, the largest crypto exchange globally, is currently under scrutiny by French authorities for allegedly offering unapproved services prior to its 2022 authorization.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Traders are scrambling for bitcoin calls or bullish bets after the cryptocurrency’s sudden rally to nearly $31,000.

Trading volumes have seen a marked increase on Coinbase since the filing for a spot bitcoin ETF.

The traditional finance giant has been rumored to be seeking the status for years.

Developers shared plans for an NFC-linked authentication service in a Thursday update.

Who better to weigh in on alleged trading desk shenanigans at Crypto.com than BitMEX, the derivatives exchange that faced similar accusations — which it denied — several years ago?

Stephan Lutz, acting CEO and group CFO at BitMEX’s parent company, 100x Group, thinks crypto exchanges that make money from proprietary trading should by now have phased out internal market making teams.

“It’s not needed anymore,” Lutz said in an interview. “You have critical mass.”

“You have enough HFTs (High Frequency Traders) out there and prop shops that can perform that function,” he added, referring to the job of liquidity providers plugging gaps in the market when there aren’t enough buyers or sellers.

The Financial Times reported earlier this week that Singapore-based Crypto.com, the exchange, runs internal proprietary trading and market making teams that trade tokens for a profit, raising concerns about potential conflicts of interest. Crypto.com told the FT that the teams in question are treated the same as any other third party and exist to facilitate tight spreads and efficient markets on its platform. It did not immediately respond to a request for comment. 

BitMEX, at one time the world’s largest crypto derivatives exchange, employs internal traders too. They work for a separate legal entity named Arrakis Capital that was at one time a major internal market maker for the BitMEX exchange. Today, Arrakis plays a far more limited role, which Lutz describes as that of a “treasury desk.”

It’s a transition he sees as natural for crypto exchanges in a market with more mature companies and a greater number of institutional liquidity providers.

Arrakis in BitMEX’s heyday

With just a handful of staff, Arrakis is both “technologically” and “organizationally” separated from BitMEX, according to Lutz.

It currently performs a narrow range of functions, including converting commission fees earned in bitcoin into fiat currency in order to pay salaries and rent; hedging BitMEX’s exposure to tokens held as inventory for the purpose of quoting prices on its platform, via BitMEX itself, as well as on rival exchanges; and making markets for BitMEX’s token BMEX, which launched in November last year, because the token has too little liquidity for external market makers to take on.

Asked whether the desk makes money, Lutz said it earns “very minor returns” of up to $100,000 a month from holding T-Bills. Last year, it lost money. 

Arrakis wasn’t always so constrained, however.

“Arrakis stopped basically market making on a broader scale in 2020,” said Lutz. In BitMEX’s heyday, before the business and its founders were rocked by charges that they had operated an unregistered trading platform brought by the U.S. Department of Justice and Commodities Futures Trading Commission, things were different.

As the chart below shows, BitMEX once dominated the crypto futures market. Of the $183.63 billion in bitcoin futures trading volume recorded in July 2019, BitMEX accounted for a staggering $143.9 billion. The platform clocked just $15 billion of a far larger bitcoin futures market in May this year.

It was around that time and earlier that BitMEX faced accusations that the company traded against its customers. Former CEO Arthur Hayes and economist Nouriel Roubini exchanged barbs on the subject over Twitter. It was the stuff of memes. Lutz didn’t join the business until 2021, but said he’s dug through the data and is satisfied the trading desk was always segregated.

“Arrakis for a while — which is long gone already — but for a while was pretty big because they were providing market making services to the platform,” Lutz said, adding that designated market makers like Jump Crypto, Jane Street and Hudson River Trading weren’t around back then. “All the other exchanges did it, maybe not the same way, but it was basically the market practice. If you wanted to have reliable liquidity in your order book, you needed to do something yourself. There was no service provider.”

Recently, regulatory pressure has pushed certain market making firms, including Jump and Jane Street, offshore.

BitMEX weighed a rebuild of Arrakis as recently as mid-2022, before the drama of Sam Bankman-Fried’s Alameda Research and FTX that engulfed the sector. The tech team at Arrakis were eager to re-enter the market making game, but after some testing BitMEX’s founders and management ultimately decided against it, according to Lutz.  

Greater scrutiny for internal traders

Lutz said that exchanges with trading teams have drawn more scrutiny since the fall of FTX last year.

But he points out that most if not all large companies employ traders as part of a treasury function. There is a distinction to be drawn, he feels, between that setup and internal teams that operate more like a hedge fund, as Alameda allegedly did.

But how do draw it? Lutz identified several red flags.

“Is there a separation of client funds and house funds? Number one. Second one is do you have access to data?” he said. “Do you have access to the positions and the positioning and the strategy of clients that enable you then to front-run? And the third one is are you big enough to move the markets on your own exchange?”

Another key factor in separating Alameda-like operations from more benign internal trading teams, according to Lutz, is fee structure. Exchanges charging little to no transaction fees could also be seen as a red flag, signaling that their role is primarily to attract trading flow for a market maker.

“Where does the economic interest sit?” Lutz said. “Where is the money to be earned?”

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

ALSO: Crypto may enduring “a crisis of confidence,” but the recent filings for spot bitcoin ETFs by large institutional investors is a promising sign, said an eToro analyst.

Authorities in Singapore have awarded 190 Major Payment licenses, and 11 of these have gone to Digital Payment Token companies.