Blue Ocean: Forex Brokers Flocking to Crypto Offerings

In a highly inflationary environment, major global central banks such as the Federal Reserve have been forced to aggressively raise interest rates. As a result, cryptocurrencies have plummeted to new lows in June this year, with the total market value of the world's crypto assets shrinking below $1 trillion from an all-time high of over $3 trillion in November 2021.

According to CoinGecko's data, the global cryptocurrency market cap as at 28 September is $951 Billion. Despite the crypto winter, we'll likely see more capital flow into the crypto market. Backed by huge profits from cryptocurrency speculation, a number of investors are investing in diversification into crypto markets. Although numerous investors have suffered tremendous loss and some have fallen into various scams in their trading journey, there is still no stopping the spread of global crypto frenzy.

Well-known forex brokers like eToro, StoneX, XP Inc. and Rico have already entered or planned to enter the crypto market to get an early share of this rapidly expanding pie.

For example, major Brazilian broker XP has launched its platform Xtage for clients to trade bitcoin and ether. Dukascopy Bank, a Geneva-based retail FX broker, has developed a marketplace for P2P exchange of cryptocurrencies, allowing clients to place their offers to buy or sell tokens against fiat currencies. The global leader in social trading NAGA has announced the release of its crypto platform NAGAX's mobile app, the NAGAX Mobile App. Users can use the native NAGAX Mobile App to trade, check their accounts, share content, learn, and manage their crypto assets from anywhere in the world. 

Moreover, brokers continue to unveil new products to strengthen cryptocurrency line-up to attract more new clients. XTB MENA, the Middle East business of Warsaw-based X Trade Brokers (XTB), has added new cryptocurrency contracts for difference (CFD) instrument to its platform. The leading multi-asset financial services firm BDSwiss has recently launched nine new CFD crypto-pairs to expand its cryptocurrency offering, which brings the total number of cryptocurrencies available to trade on the BDSwiss MetaTrader, WebTrader and Mobile app platforms to 26 crypto-pairs. eToro continues to add new tokens for customers to trade, bringing the total number of cryptoassets available on the platform to 62.

In addition to greedily eyeing on the retail market, brokers are proactively applying for licenses in crypto-friendly countries or regions in order to avoid possible future regulatory risks.

For instance, eToro has received registration from the Autorité des Marchés Financiers (AMF) as a Digital Asset Service Provider (DASP) and from the Organismo Agenti e Mediatori (OAM) in Italy as a cryptoasset provider. Dukascopy Bank​ has granted authorization from the Swiss financial regulator, FINMA, to provide its customers with the exchange of cryptocurrencies and fiduciary deposits in digital assets allowing investment and custody of cryptos on behalf of clients.

The competition in the forex market is getting more and more intense, with low SWAPs, low spreads and no dormancy fees squeezing the living space of brokers. As a consequence, many brokers are turning to develop crypto assets to add more edges to their future development. How big will the crypto market grow? Will cryptocurrencies be recognized by the government? Let's wait and see what happens.