CRYPTO: 190 Exchange License applications in Japan, $183 million in funding for ICE's Bakkt

We'd love to write about all the interesting decentralized applications that the crypto community has scaled to millions of users. But we can't, because it hasn't. So instead, the news cycle is still stuck on the financialization and securitization of tokens in the far reaches of the Internet. At least it is a re-thinking of capital markets from the bottom up -- and this being a financial technology newsletter, we will oblige with the theme. But what may seem obvious on the surface is really not. Blockchain-based exchanges are not about better systems today (they may be in the future), but about finding cash flow to survive the nuclear winter and later expand into adjacent verticals (e.g., Coinbase, Binance).

The first story is about Japan, where a crypto-friendly regulator has received 190 cryptocurrency exchange license applications. Pause on that. Financial instrument exchanges are not this popular organically, with just 16 stock exchanges accounting for 87% of total stock exchange market cap (see chart below). In Europe, a similar fervor is in place about starting up new banks -- something about the power of the Crown in the palm of your hand. So seeing a wave of small, uncoordinated capital markets infrastructure teams try to bootstrap into a licensed, centralized/monopolized venue for financial exchange across the world isn't a sign of positive progress. It is a sign of a meme echoing across Twitter.

Second, we point to the $182.5 million funding round just raised by Bakkt, owned by the Intercontinental Exchange (also owner of the NYSE). Microsoft, BCG, Galaxy, Pantera and others chipped in. This is a fat raise, and it reminds us of R3's bank consortium, Digital Asset's trading systems, and a bit of Telegram's $1.7 billion venture capital black hole. Wall Street is building infrastructure for Wall Street, expecting to be the owner of all crypto OTC and institutional flows -- the blue ocean opportunity is now gone. Yet Asian exchanges like Binance continue to be the life-blood of retail crypto finance, built for users trained on video game money. Dressing this stuff up in a suit and trading a lot of it is a meme as well.

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Source: Cointelegraph (Japan), Japanese FSA (Virtual Currency report), Visual Capitalist (Stock Exchanges), Coindesk (Bakkt)