Crypto exchange Binance says the current regulatory environment is keeping traditional brokers from offering crypto services.
In a recent report put together by the Binance Broker and Binance Research teams, the crypto exchange reveals that traditional brokers have not kept up with the changing needs of financial market participants.
“Due to regulatory restrictions, traditional brokers have not opened up spot crypto services (only derivatives and other instruments). As a result, crypto exchanges have established themselves as the center of the emerging 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.”
Binance notes that for many decades, prime brokers have positioned themselves as a “one-stop-shop of financial services” for large players in the industry, providing a wide array of offerings including trading, custody, cash management, risk management, stock buybacks, and leveraged trading among others.
As prime brokers struggle to tread the territory of digital assets, crypto exchanges have stepped up to meet the growing demand of institutional firms.
“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….
Crypto broker service providers have empowered brokers to offer services to institutional participants from both crypto and traditional brokerage environments, 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.”
As to where the crypto brokerage industry is headed, Binance believes traditional brokers will soon start offering crypto services as regulatory requirements ease.
“As the crypto industry continues to develop, the gap between the conventional financial market and the crypto market will continue to 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.”
You can read the full report here.