Paxos, a blockchain infrastructure company, is launching a new business aimed at introducing cryptocurrency across a broker-dealer's workforce of financial advisers.
With Paxos Crypto Brokerage, broker-dealers can offer a technology product that allows financial advisers to trade digital assets like bitcoin on behalf of clients, removing a significant barrier preventing many advisers from entering the market. While 94% of advisers receive questions about crypto from clients, only 15% are allocating client portfolios toward the asset class, according to a Bitwise survey.
Crypto Brokerage enables advisers to trade or manage client assets at their discretion and verifies the identity of the adviser making trades to satisfy compliance requirements.
“Crypto is growing in every sector, and we’re proud to provide this new platform that gives financial advisors access to crypto for their clients,” Walter Hessert, head of strategy at Paxos, said in a statement. “As interest in crypto continues to grow, it’s important to recognize that technology will underscore a company or industry’s success in this space.
Interactive Brokers, the online brokerage with $320 billion in assets under custody, rolled out crypto trading for its advisers in June 2021, using Paxos. The technology allows the firm’s advisers to trade and manage digital assets as they would any other asset class, said Steve Sanders, executive vice president of marketing and product development at Interactive.
With the public launch of Paxos Crypto Brokerage, the fintech is setting its sights on more partnerships with large enterprises.
“We want to be the pipes behind the scenes,” said Kyle Libra, director of product management at Paxos.
Paxos also provides asset custody services to Flourish Crypto, the MassMutual-owned startup that aims to help independent advisers trade bitcoin. Where the new Crypto Brokerage offering differs is that it can support a 1,000 or even 10,000 trades at once, Libra said.
“I think the important thing that differentiates us from the rest of the market is really about tremendous scale,” he said.
While market volatility has raised questions about the viability of the digital asset market and many think significant regulatory changes are coming, firms are still interested in giving advisers access to cryptocurrency.
“What we’re finding with financial advisers, with a regulated-first approach that really resonates with them, larger [institutions] have not changed plans at all,” Libra said. “They are focused on the long term and where [cryptocurrency] will go.”
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Pro-bitcoin professionals, however, say the cryptocurrency has ushered in change.
“LPL has evolved significantly over the last decade and still wants to scale up,” says one industry executive.
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