If Wall Street is to be attracted to crypto, businesses need tools that better connect them to trading opportunities that are similar to the tools they use in the capital markets.
The digital asset space has garnered significant interest from traditional financial institutions (TradFi) for months as Wall Street’s big players reassess it as a solid and lucrative asset class. However, to fully reap the benefits of this sector, TradFi companies need the right applications to engage, according to Anton Katz, CEO of Talos.
In an interview with decrypt, Katz said financial firms like banks and hedge funds are looking for tools that will allow them to get the best price with the least amount of risk. To help clients do this, Katz sees Talos’ role as creating the “pipeline” that better connects these companies to liquidity using tools they are familiar with in the capital markets.
“It’s not very sexy to say that to investors, but that’s how we feel about it,” Katz said decrypt. “We build the pipelines and then the layer above.”
For Katz, an MIT-educated engineer who has held leadership positions at AQR Capital Management and Broadway Technology, building connections between digital and traditional financial markets comes naturally. In 2018, Katz and fellow Broadway star Ethan Feldman founded Talos as a trading platform intended to provide institutional investors with digital asset trading opportunities.
Building customer sanitation is necessary, Katz said, as the digital asset space is experiencing what he says is “an institutionalization of the entire market” in the wake of spectacular failures Terra And FTX– in addition to the tightened control by the supervisory authorities.
Some of the protections that institutional investors want to see before investing in cryptocurrencies already have parallels in the markets they are used to that can be imported, he said.
“We’ve seen events like this where people eventually say, ‘We need a lot more protection here,'” Katz said. “Well, the capital markets side is actually doing pretty well because it’s years of bad things that’ve happened that created an ecosystem of collateral and all that stuff.”
For years, trad-fi firms have been wary of crypto markets, whether because of the uncertainty that accompanies wild market swings or to avoid running afoul of regulators. For Talos customers, the platform offers connections to its wide network of service providers, which also includes major players such as Coinbase and Kraken to ease those worries.
But despite all the troubles crypto has seen of late, Wall Street still feels like there are still rewards up for grabs. In June, BlackRock, the world’s largest wealth manager, made an application for a spot market bitcoin exchange-traded fund, and that was it others quickly followed.
For his part, Talos announced a partnership with Wall Street-backed cryptocurrency exchange EDX Markets in July to connect its customers to access Talos’ network providers via a front-end system.
Despite the perception that crypto is in a “down market,” Katz said this is an ideal time to double down on creating the market infrastructure needed to entice more institutional players to join. In evidence, he said Talos has seen increasing interest in his platform from vendor firms such as banks — players he said “only enter the domain when there is underlying demand.”
Given the “very positive signals” provided by recent ETF filings, Katz said he believes it’s widespread that demand for digital assets isn’t slowing down.
“It’s a young market, it’s evolving, but everything we’re seeing right now suggests it’s going to be a pretty big contender within the institutional landscape,” Katz said.
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