‘We all better listen up’: The CEO of an FX trading firm says Wall Street needs to pay attention to the breakneck growth of crypto exchanges

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  • Cryptocurrency exchanges are growing fast thanks to the booming market for digital coins. 
  • That has David Mercer, the CEO of LMAX Exchange, a foreign exchange trading firm, warning Wall Street that crypto exchanges might soon come after their respective businesses.

Some of most powerful people on Wall Street have derided cryptocurrencies as a “fraud,” “bleeding edge,” and as a “bubble.”

But it might be cryptocurrency companies that have the last laugh, according to David Mercer, the chief executive of LMAX Exchange, a UK-based forex trading technology company. 

During an interview with Business Insider, Mercer said he wouldn’t be surprised if crypto companies, specifically crypto-exchanges, start snapping up traditional financial-services companies and break into new markets. 

“We all better listen up,” Mercer said. 

“GDAX, Kraken, and Bitfinex, all these guys could get big enough to the point where they don’t even need to stay in crypto.”

Crypto exchanges, which helped shepherd the nascent digital coin market into the mainstream during 2017’s crypto boom, facilitate approximately $20 billion worth of trading on a given day, according to data from CoinMarketCap.

That’s tiny compared to the $5 trillion forex market, Mercer says, but it’s still a 4,000% increase from where the market was in the Spring of 2017.

Exchanges have made a killing from that boom, raking in as much as $3 million from fees a day, Bloomberg estimates. Coinbase, which is valued at over $1.6 billion, crossed $1 billion in revenues in 2017. 2017 net revenues for Nasdaq, one of the largest exchange operators in the world, were $2.4 billion, by way of comparison. 

Crypto-exchanges are sitting on a lot of cash. And some appear to be flexing their muscles. Coinbase recently hired an executive from LinkedIn to lead an acquisition spree as its merger and acquisition boss. The company also snagged an executive from the New York Stock Exchange. Kraken, another exchange, is prepared to hire at least 800 people in 2018. 

“They can move into the mainstream and guess what banks and brokers, the guys that you are kind of looking at like they’re fly by night, they’ve got 25 million of your customers,” Mercer said. “How long before they start offering, equities, FX, wealth management? It’s not impossible. These guys need to take note.”

Richard Johnson of consultancy Greenwich Associates recently published an op-ed on Business Insider in which he made the case for why it would make sense for a crypto company to buy the Chicago Stock Exchange. Coinbase, Kraken, and Circle, which recently bought crypto exchange Poloniex for $400 million, are among the companies Johnson thinks could acquire CHX. 

“Future token issuances will need to be compliant with securities regulations, some existing tokens may be restructured for regulatory purposes, and marketplaces for these tokens may need to become compliant under the Exchange Act of ’34,” Johnson wrote. 

“Thus the exchange license that the CHX owns is now a potentially valuable asset for a crypto exchange.”

And according to Bloomberg, crypto companies have expressed an interest in acquiring the exchange. 

Mercer said one exchange, which he declined to name, offered to buy his company after it helped the exchange with trading issues. The exchange told Mercer they were set to make $200 million for the year. 

“This is where they are going,” he said. 

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