Two major market-making firms, Jane Street and Jump Trading, are scaling back their involvement in trading digital assets due to increased regulatory scrutiny in the United States. According to a source familiar with the matter, both companies have decided to retreat from crypto trading in the U.S. amidst a regulatory crackdown on the industry. However, they are still maintaining a presence in the crypto market, albeit on a smaller scale.
What’s The Way Forward
The stringent regulatory environment in the United States has significantly intensified pressure on the crypto industry. Recent incidents, such as the collapse of the centralized exchange FTX and failures associated with TerraUSD, have added to the concerns. As a result, some investors have chosen to exit the crypto market, while others have become more cautious. Notably, major players like Coinbase have pushed back against the Securities and Exchange Commission (SEC) in response to the regulatory actions.
Jump Crypto, the digital asset unit of Jump Trading, is reportedly withdrawing from the U.S. markets. However, the firm is exploring opportunities to expand its presence internationally. On the other hand, Jane Street has completely abandoned its plans for global crypto expansion.
The American Crypto Exodus
This trend of market-making firms pulling back from the U.S. crypto market is part of what can be termed an “American Crypto Exodus.” Several other crypto firms in the U.S., including Coinbase, Gemini, and Galaxy Digital, are also considering expanding their operations overseas. Jane Street and Jump Trading were previously targeted in an investigation by U.S. prosecutors into the failed Terra/Luna ecosystem last year.
Furthermore, Jump Crypto has had a significant involvement in the TerraUSD stablecoin project since 2019. In March, Jane Street was anonymously indicted by the Commodity Futures Trading Commission (CFTC) in its lawsuit against Binance. The CFTC speculated that Jane Street may have offered unregistered crypto derivatives products in the U.S., which would be a violation of federal law.
It’s worth noting that former FTX CEO Sam Bankman-Fried, who previously worked at Jane Street, left the firm in 2017 to start Alameda. Meanwhile, Grayscale, the world’s leading crypto asset manager, remains committed to its plans for a crypto exchange-traded fund (ETF), despite facing criticism from the SEC.
As the regulatory landscape for cryptocurrencies evolves, the decisions of market-making firms like Jane Street and Jump Trading reflect the challenges and uncertainties faced by the crypto industry. The shift towards international expansion by various U.S.-based crypto firms further illustrates the growing importance of global markets in this rapidly changing landscape.