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The week in fintech: Wall Street largely absent from cryptocurrency conference

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The week in fintech: Wall Street largely absent from cryptocurrency conference

This recap features updates on bank technology, payments, online lending and other news in the U.S. financial technology space. Send tips, ideas and chatter to rachel.stone@spglobal.com. For other recent fintech news, click here.

Although more than 8,000 attendees flocked to New York City for a recently concluded cryptocurrency conference, Wall Street's biggest banks and exchanges seemed to have stayed on their side of the city.

Consensus, CoinDesk's cryptocurrency- and blockchain-focused conference, was the industry's largest-ever gathering. Bitcoin and other cryptocurrencies gained significant popularity and media attention in 2017. But with the sector being buffeted by volatile prices, traditional financial institutions have only recently started to explore the space.

CME Group Inc. and Cboe Global Markets Inc. unveiled bitcoin futures in December 2017; Intercontinental Exchange Inc., the owner of the New York Stock Exchange, launched a cryptocurrency-focused data feed in January; and Nasdaq Inc. teamed up with Gemini Trust Co. LLC in April to provide the cryptocurrency exchange with surveillance technology.

The biggest U.S. banks have been exploring projects with blockchain, the technology underpinning cryptocurrency markets. However, it is unclear whether they are actually using blockchain solutions, and several projects have reportedly shuttered amid a search for profits.

JPMorgan Chase & Co.'s new blockchain lead, Christine Moy, told CoinDesk that the bank is not done with its work in distributed ledger technology. News reports about JPMorgan spinning off Quorum, its blockchain project, surfaced in April, around the same time that the then-head of the project left the company.

In investment banking, Goldman Sachs Group Inc. has been a pioneer in the industry, launching a bitcoin trading desk at the beginning of May. Goldman was also one of the first to clear bitcoin futures contracts.

While Morgan Stanley is not building a cryptocurrency trading desk, it has started to arrange some trades for its institutional clients of bitcoin-related products, The Wall Street Journal reported. The company is exploring potentially providing institutional clients access to securities and derivatives, such as CME's and Cboe's futures contracts, based on bitcoin, a person familiar with the bank's plans told the news agency.

Panelists speaking at the Consensus conference did not include current representatives from these mainstream financial companies, though one panel featured several former Wall Street employees discussing how they defected to the cryptocurrency marketplace. That seemed to be the norm at the conference: As opposed to hearing from top executives of America's biggest banks and exchanges, attendees listened to panels filled with emerging names in a still-nascent industry.

"You have large investment banks tapping into the market, but not fully stepping in," Luka Gubo, CEO of cryptocurrency startup Blocktrade.com, said in an interview. Blocktrade.com in the process of becoming the first fully regulated cryptocurrency exchange in the European market.

Entering the emerging market poses a "reputational risk" for these companies, but once the first large institutions "go full speed ahead," rather than just "dipping a toe in," Gubo believes other traditional financial companies will follow.

Elsewhere at Conesnsus, Commodities Futures Trading Commission Commissioner Brian Quintenz confirmed that the CFTC and the SEC are looking at whether Ethereum's ether token is a security. He said the two regulators need to make a careful, but expeditious, decision.

"It's taken too long," he said at the conference. "We need to be respectful of the market's need for clarity."

The cryptocurrency universe has been ripe with debate over whether or not tokens like ether and other initial coin offerings should be deemed securities and regulated as such.

Ether is the regulators' first test case because there is a demand from the market to try to list derivatives on it, Quintenz said in an interview, underscoring the importance of determining under whose jurisdiction an ether derivative would fall.

CME, in partnership with Crypto Facilities Ltd, launched two Ethereum-focused indexes this week, which will provide a real-time ether price in U.S. dollars and a daily benchmark price in U.S. dollars at 4 p.m. London time. Although many people view this as a stepping stone to listing ether futures, the company confirmed that there is no immediate plan to do so.

Also at the conference, Goldman-backed Circle Internet Financial Inc. announced that it raised $110 million in a series E funding round led by Bitmain Technologies Ltd. The global cryptocurrency finance company will also be launching tokenized U.S. dollar coins in the summer of 2018, enabling customers to buy and use Circle USD Coin fiat tokens, pegged to the US dollar, in the cryptocurrency ecosystem.

From May 11 to May 17, the SNL U.S. Financial Technology Index fell 0.72%.

A recent report from S&P Global Market Intelligence explores how banks and insurers are embracing fintech innovation. The report looks at recent trends and provides outlooks for the insurtech, digital lending, digital investment management, digital banking, payments and distributed ledger technology sectors. Click here to read the report.