Crypto exchanges appear to play a key role in helping traditional brokers establish themselves within the industry
Binance, the world’s largest cryptocurrency exchange, has expressed its sentiments regarding the current regulatory environment’s capacity to open up broker participation within the industry.
Teams from Binance Broker and Binance Research put together a report that revealed the struggles traditional brokers have had when it came to keeping up with the new and different needs of the financial market.
The report, entitled What is the Outlook for the Crypto Brokerage Industry?, was published on September 15, on the Binance Research website.
According to the report, regulatory restrictions have prevented traditional brokers from opening spot crypto services. This leaves the role to crypto exchanges, which have managed to establish themselves at the center of the crypto brokerage industry.
“Consequently, large crypto exchanges have launched prime brokerage services to provide institutional investors with custody, block trading, aggregation trading, and other services,” the report added.
Binance notes that prime brokers have traditionally been capable of providing a wide variety of financial services for large players in the industry. These services include trading, cash management, custody, risk management, leveraged trading, stock buybacks and others.
However, they may be hard-pressed to keep up with developments in the crypto industry — and crypto exchanges have already gotten a head start.
“Some crypto exchanges, wallets, and trading terminals have begun prime brokerage businesses. For instance, Coinbase offers prime brokerage starting from custody, whereas Huobi and Bequant offer prime brokerage with [over-the-counter] block trading….”
The report explains that crypto broker service providers have given traditional brokers an opportunity to provide services to institutional participants inside and outside of the cryptocurrency industry, “promoting the lateral expansion of the industry through non-crypto companies offering dedicated crypto trading to their users, which is expected to further lower entry barriers in the industry.”
Binance believes that in the future, the gap between the traditional financial market and the crypto market will narrow.
“With a growing base of retail and institutional users, an expanding market, and the emergence of increasingly specialized functions, a virtuous cycle of growth started,” it explained.
Compliance will also continue to be a crucial talking point from this point onward. The report points to Binance Brokerage as one of the brokerage service providers that are working towards the establishment of a more compliant environment, particularly in their efforts to “leverage liquidity from crypto exchanges to partner brokers and clients conventional and crypto markets, to foster the expansion of the crypto industry as a whole”.