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- Citadel Securities enters the cryptocurrency trading market as a market maker for key trading venues.
- The firm conducts testing in international markets first and adapts to shifting dynamics in the US.
- Increasing institutional crypto uptake with Citadel working to make digital asset markets less volatile.
Citadel, a global financial giant that manages over $64bn in assets, is expanding into the cryptocurrency market. The company, which once claimed a monopolistic position in the traditional financial segment, has been wary of digital assets for a long time. But with more stringent regulations at play and shifting institutional focus, Citadel is now setting its sights on becoming an essential player in crypto trading.
As reported by Bloomberg, Citadel will provide access to cryptocurrencies and perform market-making for such digital assets as BTC and Ether on Coinbase, Binance, and Crypto.com. This change comes at a time of increasing regulatory attentiveness in the US concerning cryptocurrencies, thus creating favorable conditions for traditional financial companies to participate. Moreover, with former President Donald Trump’s increased focus on the crypto sector, institutional investors have also turned more favorable.
Citadel’s Strategies for Crypto Market Growth
To avoid legal risks at this stage, Citadel is set to launch its crypto trading outside the American market first. This strategy enables it to operate in international markets without losing sight of the emerging changes in regulations in the United States. This decision aligns with a global trend where established financial institutions experiment with crypto businesses in external markets before establishing operations within their home markets.
Launched recently, Citadel intends to take its market-making prowess into cryptocurrency trading. The firm holds a significant position in the financial markets and is often seen as the market maker in traditional finance. Applying this approach to digital assets, Citadel aims to stabilize and increase the fluctuation of the crypto market to attract more institutional investment. The company can positively influence the system by helping make the sector less chaotic and more organized.
This is quite a change of tactic for Citadel, which until recently did not invest heavily in cryptocurrencies due to legal issues. The failure of FTX only deepened its risk aversion, owing to the dangers posed by companies that commingle customer and corporate funds. However, with more clarity surrounding the regulations and more institutional investors looking for crypto exchange services, Citadel has started to shift accordingly.
Citadel’s Previous Crypto Involvement
Before this expansion, Citadel had already taken steps into the crypto space. In 2023, it collaborated with Charles Schwab and Fidelity Investments to create EDX Markets, a trading platform for institutional investors. Like conventional financial markets, EDX has a trade structure set up for participants and is overseen by regulation.
Moreover, Citadel was connected with Terraform Labs before the stablecoin they created: TerraUSD crashed in 2022. Terraform Labs’ founder, Do Kwon, blamed Citadel for the crash, but the firm responded that it only executed small test trades. The case against Citadel did not move further.”
Citadel ventured into cryptocurrency after raising $1.15 billion from Sequoia Capital and Paradigm. Having positioned itself as an active participant in the institutional crypto trading space, it can be critical in developing digital assets.
This aligns with the enhanced focus of large financial institutions to decrypt the potential of cryptocurrencies. Thus, Citadel’s presence can establish the digital asset market as the standard for regulation, increasing the likelihood that other institutions will also enter the market.
Also Read: Georgia Divided on Bills Concerning Strategic Bitcoin Reserves
