SBI Invests $9 Million in Institutional-Grade Cryptocurrency Derivatives Platform

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Japanese financial services giant SBI Holdings has invested $9 million in U.S. digital marketplace architect Clear Markets to fund the latter’s creation of a cryptocurrency derivatives trading platform built for institutional investors.

Nikkei Asian Review reports that SBI Crypto Investment has obtained a 12 percent stake in Clear Markets, which is headquartered in Charlotte, NC and has branch offices in New York, London, and Tokyo. Though the terms of the deal were not disclosed, the publication states that SBI likely paid 1 billion yen ($9 million) for its minority ownership position in the company.

In funding Clear Markets, SBI aims to build a derivatives exchange that allows institutional investors to trade investment products tied to the price movements of bitcoin and other cryptoassets. Such products — which may include futures, options, and swaps — allow institutions to hedge other positions that they may have in the cryptocurrency market, reducing risk and enabling them to lock in profits or mitigate losses.

Along with lack of access to regulated custodians, the dearth of cryptocurrency derivatives products is often cited by institutional investors as a reason that they have not felt comfortable allocating capital into this burgeoning industry.

At present, the U.S. is home to two regulated exchanges — CBOE and CME, both based in Chicago — that offer bitcoin futures contracts. Cryptocurrency trading platform LedgerX offers institutional investors several other derivatives products, including calls, puts, and day-ahead swaps, but it has yet to attract consistent, meaningful volume.

Nevertheless, industry analysts are confident that the tide will turn over the course of the next calendar year, largely due to the entry of new custodians into the market and the development of new platforms that provide institutions with more flexibility in how they obtain exposure to cryptoassets.

Earlier this month, SBI became the first banking institution to directly launch a cryptocurrency exchange. That platform, VCTRADE, serves Japanese retail investors.

Previously, SBI — which has formed a close partnership with U.S. blockchain startup Ripple — led funding rounds in several large cryptocurrency exchanges, including the Tokyo-headquartered bitFlyer and the San Francisco-based Kraken.

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Josiah is an assistant editor at CCN. A former ancient and medieval literature teacher, he has been reporting on cryptocurrency since 2014. He lives in rural North Carolina with his wife and children. He holds investment positions in bitcoin and other large-cap cryptocurrencies. Follow him on Twitter @Y3llowb1ackbird or email him directly at josiah.wilmoth(at)ccn.com.