Europe’s biggest trader of ETFs making big moves into cryptocurrency trading

According to reports, Europe’s largest trader of exchange-traded funds (ETF) is moving more and more into crypto investment, despite the efforts of the regulators in its country of origin to warn investors away from virtual currencies. 

Flow Traders, an Amsterdam ‘speed trader’ – the term used to describe traders that use of high-speed, algorithmically driven, automated trading methods – is dealing in Exchange-Traded Notes (ETN) based on Bitcoin and Ether, according to co-CEO Dennis Dijkstra, speaking to Bloomberg.

The firm moved around a massive €244bn-worth of ETFs – securities that pay out based on an investment in a particular index of stocks, for example the FTSE100 – in just the first three months of this year. Now Bloomberg cites XBT Provider, a company that issues crypto ETNs – essentially a bet that pays profits based on the performance of a particular market without actually buying the asset in question like an ETF would – as telling it that Flow Traders has “dramatically increased” trading of its products during Q2 of 2018.

“People underestimate crypto,” Dijkstra said. “It’s big, and it is to be regulated very soon. The market participants are much more professional than people think.”

Ironically, the Dutch Authority for Financial Markets (AFM) do not feel the same way.

“We discourage activities in cryptos both by consumers and professional license holders,”  a statement from the regulator read. “By virtue of its newness and the anonymity it potentially offers, it is very prone to abuse. Given its inability to serve the promised purpose as a currency, we don’t regard it to be an asset class.”

While the objection will be noted, it will not apparently cause Flow Traders much pause for thought. Indeed, their move is part of a concerted push by some big-time financial players into the cryptocurrency markets.

While some are working with the underlying blockchain technology to re-shape their back-end processes others, like Goldman Sachs, are moving into trading the big cryptocurrencies. There are also beginning to be signs of established trading platforms like LMAX moving towards offering crypto-based facilities, while consumer facing services like Coinbase and eToro are expanding their services.

Cryptocurrencies are currently under close scrutiny from regulators in Europe, America and the UK – while countries such as India have already taken strident steps to limit their use. Regulatory efforts are being led by Japan, at present, though the G7 group has agreed to liaise on policy development for exchanges over the coming months.