Crypto Facilities in talks with FCA for expanded asset custody services

Crypto Facilities, a company acquired by Kraken in 2019, is reportedly in discussions with the UK’s Financial Conduct Authority (FCA) about expanding its asset custody services. The London-based firm, known for offering futures contracts in cryptocurrencies to institutional investors, is considering introducing futures contracts denominated in the fiat currency held on behalf of clients, as reported by Bloomberg on Thursday.

Crypto Facilities has gained recognition for its provision of cryptocurrency futures contracts, primarily catering to institutional investors. CEO Mark Jennings has disclosed that the company is actively exploring the possibility of introducing futures contracts denominated in the fiat currencies held on behalf of its clients.

To implement this strategic move, Crypto Facilities would need to secure an extension of its multilateral trading license, which it initially obtained in 2020. Jennings has expressed his expectation that the regulatory approval process for this expansion could span anywhere from six to twelve months, underscoring its pivotal role in the firm’s broader strategy within the institutional cryptocurrency market.

This initiative by Crypto Facilities seeks to address the void in the crypto derivatives market that emerged following the collapse of FTX in November. Prior to the FTX incident, the firm consistently achieved daily trading volumes ranging from $700 million to $800 million. However, in the aftermath of these events, trading volumes have experienced a substantial decrease, currently hovering around approximately $100 million.

According to data released by CCData, the aggregate trading volume within the crypto derivatives market witnessed a decline exceeding 12% in August, reaching a total of $1.62 trillion. This decrease marks the second-lowest level recorded since 2021, highlighting the ongoing challenges and fluctuations within the cryptocurrency derivatives sector.