A UK trading firm gets green light to offer a new derivative tied to crypto

As new crypto derivatives products — including an ETF and physically delivered futures — hang in the balance in the U.S., one UK trading shop has started trading a new financial product tied to cryptocurrency.

B2C2, a London-based trading firm, got the green-light from British financial regulators to trade so-called contracts-for-difference for their institutional clients, the company said Thursday in a news release. “The FCA authorisation will allow these clients of B2C2 OTC Ltd to gain exposure to cryptocurrency markets via the firm’s CFDs,” the company said. 

B2C2 is not as well-known as other cryptocurrency firms in the market, such as Coinbase or Kraken, but it oversees a sizable number of cryptocurrency trading volumes, according to documents reviewed by The Block. Founded in 2015, the firm is led by former Goldman Sachs trader Max Boonen. 

The firm was looking for a buyer in 2018 as the crypto market plunged from its all-time highs at the beginning of the year. But now things are looking up for the company as it improves its market making capabilities and rolls out new products. As for the CFD, the product will allow investment bank and broker clients to make a leveraged bet on the future price of a given crypto. In a sense, the product allows traders and investors to gain exposure to crypto markets without having to manage or store coins themselves. “Eligible counterparties and professional clients can now gain derivative exposure to the cryptocurrency markets, benefiting from the competitive pricing and liquidity they’re accustomed to receiving from B2C2 while avoiding the risks associated with crypto custody.”

CME Group and Cboe Global Markets thought that would be a selling point for their bitcoin futures products, which also don’t require investors to manage coins, but both markets have seen very little action. 

It’s striking that the FCA has given B2C2 permission to trade CFDs given their risk, whereas regulators in the U.S. have been moving at a slower pace to approve crypto products. It’s still unclear if the Securities and Exchange Commission will approve an exchange-traded fund tied to bitcoin this year. It is also unclear if the Commodities Futures Trading Commission will approve derivatives tied to ethereum. ICE’s Bakkt is waiting for regulators to give them the green-light on their physically delivered bitcoin futures contract, as well.