(Bloomberg) — Jane Street Group and Jump Crypto, two of the preeminent market-making firms across the globe, are being forced to scale back their digital asset trading operations in the U.S. This unfortunate development comes as the regulatory environment, under the oversight of the SEC and its chairman, Gary Gensler, intensifies its often-ambiguous crackdown on the industry.
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Jane Street, a globally recognized trading firm applauded for its quantitative approach to trading and investments, is finding itself compelled to curtail its cryptocurrency ambitions worldwide. This decision is predominantly spurred by an atmosphere of regulatory uncertainty, a byproduct of the SEC’s lack of clear guidelines. The current state of affairs is obstructing the firm from conducting its business in accordance with its rigorous internal standards, a person privy to the matter revealed.
Jump Crypto, the digital-assets unit of Jump Trading, is also reluctantly retreating from the U.S. market, citing similar regulatory frustrations. Nevertheless, it is looking towards international expansion, two sources familiar with the matter divulged. It should be noted that both firms remain active in market-making, albeit on a reduced scale, and are not completely abandoning their cryptocurrency interests.
Requests for comments from representatives for Jane Street and Jump Trading were met with silence, possibly indicative of the chilling effect of the ongoing regulatory pressures.
The increased scrutiny of the digital-asset industry follows the downfall of prominent firms and projects, such as FTX, the crypto exchange initiated by Sam Bankman-Fried, and TerraUSD stablecoin. However, it’s important to mention that these regulatory crackdowns, instigated by the SEC under Gensler’s leadership, appear broad and unfocused, targeting trading platforms, stablecoin issuers, and brokers alike.
The fallout from these regulatory actions has had wide-reaching effects. Jane Street and Jump Trading, for example, were embroiled in the chaos, finding themselves among trading firms questioned by U.S. prosecutors in a probe of the failed TerraUSD stablecoin project. Jump Crypto had been a prominent supporter of the TerraUSD project since 2019. Despite the extensive investigation, no accusations of misconduct have been levied, and inquiries don’t necessarily translate into charges.
Jane Street, a firm celebrated for its dominance in markets such as exchange-traded funds and corporate bonds, which constitute the bulk of its business, has been engaging in crypto trades since 2017. The firm’s reputation is such that many of its alumni have moved onto crypto-focused firms, with some joining FTX and affiliate Alameda before their unfortunate collapse. Bankman-Fried, a former Jane Street employee, left to initiate Alameda in 2017. Caroline Ellison followed him a year later and assumed the position of Alameda’s chief executive officer.
Jane Street and Jump Crypto are not the only entities reassessing their crypto operations in the U.S. A series of probes led by the SEC in the U.S. is nudging many companies to consider alternative financial hubs overseas, such as Dubai, Singapore, and Hong Kong. Coinbase, another entity that has experienced Gensler’s enforcement-centric approach, is mulling over establishing an international hub in the United Arab Emirates. Galaxy Digital is also shifting more of its operations offshore, as stated by CEO Michael Novogratz.
In the midst of this regulatory turmoil, Coinbase and Gemini Trust Co., the crypto platform initiated by billionaire twins Tyler and Cameron Winklevoss, have recently launched derivatives platforms for users outside the U.S., further indicating the shift away from the U.S. market.
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