SAN FRANCISCO — Some of the biggest names on Wall Street are warming up to Bitcoin, a virtual currency that for nearly a decade has been consigned to the unregulated fringes of the financial world.
The parent company of the New York Stock Exchange has been working on an online trading platform that would allow large investors to buy and hold Bitcoin, according to emails and documents viewed by The New York Times and four people briefed on the effort who asked to remain anonymous because the plans were still confidential.
The news of the virtual exchange, which has not been reported before, came after Goldman Sachs went public with its intention to open a Bitcoin trading unit — most likely the first of its kind at a Wall Street bank.
The moves by Goldman and Intercontinental Exchange, or ICE, the parent company of the New York Stock Exchange, mark a dramatic shift toward the mainstream for a digital token that has been known primarily for its underworld associations and status as a high-risk, speculative investment.
The new interest among Wall Street power brokers also represents a surprising new chapter in the renegade history of Bitcoin.
The virtual currency was created after the 2008 global financial crisis by a still-anonymous programmer who used the name Satoshi Nakamoto. The idea was to replace the existing banking structure with an online alternative that couldn’t be controlled by a handful of powerful organizations.
But instead of being replaced, the old banks are beginning to assert their own role in the unorthodox financial world of virtual currency, sometimes called cryptocurrencies.
While Bitcoin was originally intended to be used by consumers for all sorts of transactions — without any financial institutions getting involved — it has mostly become a virtual investment, stored in digital wallets and traded on mostly unregulated exchanges around the world. People buy Bitcoin in the hope that its value will go up, similar to the way they purchase gold or silver.
Details of the platform that Intercontinental Exchange is working on have not been finalized and the project could still fall apart, given the hesitancy among big Wall Street institutions to be closely associated with the Wild West of virtual currencies. A spokesman said that the company had no comment.
Many corporations and governments have expressed interest in the technology that Bitcoin introduced, particularly a form of database known as the blockchain.
Some large financial exchanges, including the Chicago Mercantile Exchange, have already created financial products linked to the price of Bitcoin, known as futures. But the new operation at ICE would provide more direct access to Bitcoin by putting the actual tokens in the customer’s account at the end of the trade.
ICE has had conversations with other financial institutions about setting up a new operation through which banks can buy a contract, known as a swap, that will end with the customer owning Bitcoin the next day — with the backing and security of the exchange, according to the people familiar with the project.
The swap contract is more complicated than an immediate trade of dollars for Bitcoin, even if the end result is still ownership of a certain amount of Bitcoin. But a swap contract allows the trading to come under the regulation of the Commodity Futures Trading Commission and to operate clearly under existing laws — something today’s Bitcoin exchanges have struggled to do.
The chief executive of Nasdaq, Adena Friedman, recently said her company could also create a virtual-currency exchange if regulatory issues are ironed out. While several hedge funds have been buying and selling Bitcoin, most large institutional investors, such as mutual funds and pensions, have avoided it largely as a result of similar regulatory concerns.
Currently, the average price of one Bitcoin is about $9,316, according to Blockchain.info, a news and data site.
Bitcoin still faces plenty of skepticism in the mainstream financial world. Over the weekend, Warren E. Buffett of Berkshire Hathaway, who has long been critical of virtual currencies, said Bitcoin was “probably rat poison squared” in an interview with CNBC. The Microsoft co-founder Bill Gates added his own skepticism, saying he’d “short” Bitcoin if he could.
And the new efforts to trade Bitcoin don’t help answer basic questions about what makes the virtual currency useful in the real world. Most attempts to use Bitcoin for everyday commerce haven’t gained traction, and investors have treated it as a speculative commodity like gold or silver.
More info - https://www.nytimes.com/2018/05/07/technology/bitcoin-new-york-stock-exchange.html
