Custody

Why the former president of NYMEX is betting his wealth on building a crypto bank

Quick Take

  • Having become President of NYMEX at the age of 35, Bo Collins is not shy of a challenge, investing his own money to build a crypto bank to rival all banks
  • Collins says he spent time lobbying the government on crypto regulation before setting up shop
  • He says now the goal is being a seriously regulated entity and to “create efficiencies” in the crypto trading world, anticipating deposits of $1.5 billion by year-end

Life in Puerto Rico is no doubt a little different than in New York.

But for former NYMEX president James “Bo” Collins, swapping Wall Street for the bustle of San Juan is the adventure he’s been seeking for years.

“I knew I wanted to invest in crypto. I’d invested as early as 2011. And I made a bigger investment in January 2017. It was kinda the most amazing time, but it was just luck,” Collins tells The Block.

“My phone was ringing off the hook, with people wanting to just ask me all the time ‘What do you think now? Can you tell me what you’re doing now?'”

In that sense, it was quite literally his calling to hang up his hat in private equity and launch a digital assets-focused venture; using solely his own capital and that of his earliest followers.

“We never made one phone call to raise money…We still are not taking any outside money.”

Since then, he’s set up Mercantile Global Holdings – spurred by the CFTC’s ruling on crypto. Its main projects are the San Juan Mercantile Exchange (SJMX), due to launch in June, and its partner bank, SJMBT, launched last month; aiming to provide both crypto trading and custody services ‘in one.’

The goal

trading

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The bank’s targets are twofold. First, it must draw in competitor U.S. exchanges to bank with them. Despite choosing Puerto Rico as its base – avoiding the regulatory bumps faced further North – Collins says it’s deeply respectful of the rules and only wants clients who also follow them.

“While a pain in the ass, and it costs something, it actually adds value…We’re building it properly.”

After that, it’s about building a cohesive, central trading platform (SJMX); or more specifically, a Dark Pool, appealing to traders who feel trapped on a single exchange.

“You have an account [on Coinbase] and you want to trade on Kraken, right? [But your trade] has to go across some other external network, either a wire system or the blockchain and make its way to offset your capital requirements of both those exchanges,” Collins says.

SJMX will supposedly give you everything at once, with the exchanges’ shared pool of deposits at its fingertips, while also addressing trading inefficiencies.

“What it allows the traders to do is on my screen, they can trade CME futures, CBOE futures and my cash…There will be what we call a Central Limit Order Book, you see all the orders, time priced priority.”

So why the Dark Pool?

“The purpose of a Dark Pool is to help protect customers from some of the shenanigans that may go on in a lit market.”

He’s not short of confidence either for a man for a man whose previous fund reportedly lost $230 million. Private conversations and the initial onboarding process led Collins to believe the bank will have $1.5 billion in deposits by the end of the year.

“Changing the behavior of a trader is really hard to do. So if you build mechanisms that allow that trader to continue to act the way he’s always acted, except you made it cheaper and faster and less hassle, you’ve hit a home run.”

Finally, although the exchange is Collins’ long-standing personal investment, it’s not all about the golden promise.

“I’m 53 and I’ve learned that living well is way more important than being rich.”

Interview conducted by Frank Chaparro.