Source:Katherine Doherty, Bloomberg

Original Title: Wall Street Goes All In on Great Crypto Comeback Fueled by Trump

Just three years ago, a heated debate at the annual global derivatives market conference - known as the "Derivatives Market Davos" - drew widespread attention. The two sides of the debate were the famous cryptocurrency billionaire and FTX founder Sam Bankman-Fried (SBF), and the head of the largest US futures and options exchange, Terry Duffy.

At the time, this confrontation not only highlighted the deep skepticism of traditional Wall Street towards the new forces in the cryptocurrency industry, but also revealed the ambition of this crypto giant to disrupt the derivatives trading model. SBF wanted to push digital assets into the mainstream market, while Duffy was a staunch defender of the traditional financial order, and the two were at odds, making this dispute a focus of attention both within and outside the industry.

But that's all in the past now.

This year, just as the executives of the world's largest exchange and cryptocurrency companies were preparing to attend the futures industry conference in Florida, US President Donald Trump announced that he would establish a strategic Bitcoin reserve. Although this move is more symbolic, it undoubtedly further establishes the legitimate status of digital assets as a mainstream financial tool.

For Wall Street institutions that have only tentatively entered the crypto market in the past, the next four years will be a rare opportunity. Under the Trump administration's push, the crypto industry is heating up rapidly. On Thursday, Bloomberg reported that World Liberty Financial Inc., a crypto company owned by the Trump family, has held business talks with the world's largest digital asset exchange Binance Holdings Ltd., and may deepen their cooperation.

This change in sentiment and atmosphere was fully reflected in this week's conference. The conference was held at the Boca Raton Hotel, where traditional finance executives and crypto industry practitioners gathered to exchange ideas. The most striking difference was that this time almost everyone was wearing suits, or at least collared shirts. The iconic crypto circle attire of shorts and T-shirts has almost disappeared, making the scene much more formal.

Even the entertainment program had an "old money" feel to it. The legendary 1970s rock band Cheap Trick took the stage to entertain the audience - and the audience included financial heavyweights like New York Stock Exchange President Lynn Martin and DRW Holdings founder Don Wilson.

"The crypto industry is back," said Catherine Clay, head of derivatives at Cboe Global Markets, a Chicago options giant, in an interview. "After a few quiet years, we're definitely seeing the crypto theme resurface at the Boca Raton conference."

During his campaign, Donald Trump promised to make the US the "global crypto capital", and since taking office, he has indeed been fulfilling this promise. He signed an executive order on digital assets and pushed regulatory agencies to take action. His securities regulatory team has set up a dedicated working group for the crypto industry, led by long-time industry supporter Hester Peirce.

All of this is boosting Wall Street's confidence in the crypto market. Citadel Securities, owned by Ken Griffin, has always been cautious in the digital asset space, but is now seeking deeper involvement and plans to become a liquidity provider in the cryptocurrency market. Meanwhile, CME Group Inc. has surpassed Binance to become the world's largest Bitcoin derivatives exchange, and is further expanding, launching Solana futures. According to insiders, Intercontinental Exchange Inc., which has always kept its distance from the crypto market, is also starting to see opportunities and is preparing to enter the field, competing directly with its old rival CME.

Overseas exchanges are also following suit. At this conference, Singapore Exchange Ltd. (SGX) announced plans to launch Bitcoin perpetual futures in the second half of this year. The company said its first digital asset contract will be strictly aimed at institutional clients.

"By the end of this year, more companies will make a big push into the crypto field," said Jeanine Hightower-Sellitto, Chief Commercial and Strategy Officer of EDX Markets LLC, a digital asset company backed by Citadel Securities. "The market sentiment has undergone a huge change, especially since the president's inauguration."

For Wall Street, this year's conference also brought a new consensus: the blockchain technology that underpins cryptocurrencies will be key to driving the transformation of the US stock market to 24/7 trading.

"In the past few years, the crypto industry has been full of hype and exaggeration," said Don Wilson, one of the founders of DRW Holdings and co-founder of the crypto company Digital Asset. But in his view, "the difference this year is that the market is really starting to realize that blockchain technology will play a core role in driving the transition to a 24/7 trading model."

After SBF's company went bankrupt and he was convicted of fraud in 2022, the cryptocurrency industry lost its former glory. That year, his FTX exchange hosted a late-night cocktail party in Boca Raton, handing out branded merchandise in a giant booth, and held a fireside chat with former baseball star turned businessman Alex Rodriguez (A-Rod). Due to his lavish spending, from US regulators to politicians, even Tom Brady, were willing to hear his thoughts.

But Duffy was not convinced. This veteran industry figure, who has long served as the head of the Chicago Mercantile Exchange (CME), started his career in the trading pits of Chicago in the 1980s. He was skeptical of SBF's ambitious plans. FTX wanted to handle all of its clients' needs in crypto derivatives on its own, using algorithms rather than brokers to help clear trades.

"I brought crypto to the CME in 2017, long before I even knew who SBF was," Duffy said in an interview this year. He bluntly stated that SBF's plan "is very dangerous from a risk management perspective."

Duffy is not shy about the confrontation they had at the Boca Raton hotel bar last year, calling it a "little scuffle." In a previous interview with Bloomberg, he recalled telling SBF directly that he was a fraud, and said the money in his right pocket was worth more than the crypto executive's assets. This claim was proven true when FTX filed for bankruptcy at the end of 2022. The bankruptcy case revealed a years-long fraud, with prosecutors alleging that SBF had stolen around $10 billion from clients, investors and lenders.

After the FTX collapse, the regulatory authorities under the leadership of U.S. President Joe Biden have launched a large-scale crackdown on the cryptocurrency industry. The U.S. top derivatives regulator - the Commodity Futures Trading Commission (CFTC) - recovered a record $17.1 billion in enforcement actions last year, most of which came from digital asset cases against FTX and Binance.

As a result, some companies have proactively scaled back their businesses and turned their attention to overseas financial centers such as Dubai, Singapore, and Hong Kong. Trading giants Jump and Jane Street have reduced their cryptocurrency market-making businesses in the U.S. Due to the lack of a clear regulatory framework from Washington, Cboe has shut down its cryptocurrency spot business.

Since Trump took office, the shackles of regulation have begun to loosen. Last month, the U.S. Securities and Exchange Commission (SEC) ended its investigation into Robinhood Markets Inc.'s cryptocurrency business and said it would not take any enforcement action. At the same time, the SEC also withdrew its lawsuit against Coinbase Global Inc., the largest digital asset trading platform in the U.S., which had previously accused it of operating an illegal exchange.

In the past month alone, the SEC has dismissed or suspended at least 10 cases against cryptocurrency companies.

Elizabeth Kirby, head of market structure at Tradeweb, said the rapidly changing regulatory environment is paving the way for institutional investors to delve deeper into the crypto market. Tradeweb is a company that operates an over-the-counter trading market, covering interest rates, credit, money markets, equities, and cryptocurrency ETFs.

Banks are also actively positioning themselves, trying to seize more cryptocurrency business. Morgan Stanley, which was not previously active in the crypto field, is now paving the way for potential IPO clients. Executives at Bank of America Corp. are discussing whether to further push for trading support for digital asset companies, while Royal Bank of Canada completed its first crypto trade at the end of last year and is seeking to expand its business.

Collaboration has become the main theme in this week's meetings. The core focus of the discussions is how traditional finance and the crypto industry can work together.

Even Duffy said he now supports the success of the crypto industry - after all, the average daily trading volume of CME's digital assets surged more than 200% last year, reaching $6.8 billion.

"We launched Bit, then ETH, and now we just announced that we will launch Solana," Duffy said, "I hope to see crypto assets become more mainstream."