Jane Street, Jump Pull Back Crypto Trading Over US Regulatory Uncertainty

May 9, 2023


(Bloomberg) -- Jane Street Group and Jump Crypto — two of the world’s top market-making firms — are pulling back from trading digital assets in the US as regulators crack down on the industry.

Jane Street is going even further by scaling back its crypto ambitions globally because regulatory uncertainty has made it difficult for the firm to operate the business in a way that meets internal standards, according to a person familiar with the matter. 

Jump Crypto, the digital-assets unit of Jump Trading, is pulling back from the US market for the same reason, though it’s expanding internationally, two people familiar with the matter said. Both firms are still making markets, though on a smaller scale, and not abandoning crypto entirely, the people said.

Representatives for Jane Street and Jump Trading declined to comment. 

Scrutiny of the digital-asset industry has intensified following the collapse of high-profile firms and projects, including FTX, the crypto exchange founded by Sam Bankman-Fried, and TerraUSD stablecoin. 

Regulatory crackdowns have focused on multiple fronts, including trading platforms, stablecoin issuers and brokers. In one example, Coinbase Global Inc., the largest US crypto exchange, received a warning earlier this year from the Securities and Exchange Commission about a potential enforcement action.  

Jane Street and Jump Trading were caught up in some of the turmoil, and were among trading firms questioned by US prosecutors in a probe of the failed TerraUSD stablecoin project. Jump Crypto had been a major backer of the TerraUSD project since 2019. No one has been accused of wrongdoing, and inquiries don’t necessarily mean that charges will be brought. 

Jane Street was also among the three US quant-trading firms cited anonymously by the Commodity Futures Trading Commission in its lawsuit against Binance Holdings Ltd. as examples of how US-headquartered clients were able to access the platform despite Binance’s promises to exclude them. The regulator also didn’t accuse the trading firms of wrongdoing. 

Jane Street, known for its dominance in markets such as exchange-traded funds and corporate bonds — which account for the majority of its business — has been executing crypto trades since 2017.

A number of Jane Street alumni went on to crypto-focused firms. Some joined FTX and affiliate Alameda before those firms collapsed. Bankman-Fried worked at New York-based Jane Street before leaving to start Alameda in 2017. Caroline Ellison followed a year later and became Alameda’s chief executive officer.

The trading firms are not alone in making changes to their crypto operations in recent months. A spate of crypto probes in the US has prompted companies to look toward financial hubs overseas, including Dubai, Singapore and Hong Kong. Coinbase is considering setting up an international hub in the United Arab Emirates. Galaxy Digital is moving more of its operations offshore, CEO Michael Novogratz has said. 

Coinbase and Gemini Trust Co., the crypto platform founded by billionaire twins Tyler and Cameron Winklevoss, both recently launched derivatives platforms for users outside the US.

--With assistance from David Pan.

©2023 Bloomberg L.P.