If you can’t beat ’em, join ’em. That’s the adage Citadel Securities is following with its newest project. The market-making giant is getting into the crypto game, even as its founder voices his own skepticism of the market. Backed by some of the biggest venture capitalist firms in the crypto industry, will a Citadel crypto product become a leader among exchanges?
Citadel Securities was founded by investing expert Ken Griffin. He created it 20 years ago to provide liquidity and execute trades for institutional and retail clients alike. It is the sister company to Citadel LLC, a hedge fund also founded by Griffin.
Citadel is one of the largest market makers in the world, operating in more than 50 countries. And in recent months, investors have been speculating about the possibility of a Citadel initial public offering (IPO). The rumors come as the company enjoys a $1.15 billion investment from venture capital firms Sequoia Capital and Paradigm. While Citadel is not commenting on the likelihood of an IPO, it is believed this investment is one of the first steps.
The company has also picked up significant interest as a result of its partnership with Robinhood (NASDAQ:HOOD). Citadel Securities is the main market maker for the company’s e-trading platform. Both came under scrutiny from retail investors in early 2021 as the Securities and Exchange Commission (SEC) investigated Robinhood’s payment-for-order-flow model.
The SEC called into question whether the model allows market makers to exploit retail trades for extra money in exchange for kick-backs. However, much of this talk is dying down after a judge dismissed a class action lawsuit by retail traders related to the practice.
Citadel Crypto Exchange on the Way, Despite Griffin’s Crypto Reservations
The company is building atop the publicity it received in the last 18 months with another blockbuster bit of news. According to CoinDesk, a Citadel crypto exchange is on the way. The news comes just weeks after Griffin made calls for tighter crypto laws.
According to the report, the company is partnering with fellow market-maker Virtu Financial on its very own cryptocurrency trading floor. While this sounds a lot like a VC-backed, centralized exchange, Citadel is loathe to call the product that. Rather, a source close to the news says Citadel describes the incoming product as “more of a crypto trading ecosystem or marketplace than an exchange.”
In anticipation of the trading product’s rollout, the company has been hiring executives to helm a broader crypto division. Apparently, Citadel does not plan to stop its crypto endeavors with just a trading platform.
The news is especially interesting considering Griffin’s stance on crypto. Indeed, he has made his skepticism of the asset class well known in the past. In October of last year, he went so far as to say crypto is a “jihadist call” against fiat currency.
Sure, he did soften his stance in March, saying he “[hasn’t] been right” on the broader market. But that doesn’t mean he is a sudden bull. Just last month, Griffin called on regulators to tamp down on the market with more regulations. Citing the collapse of the Terra Classic (LUNC-USD) ecosystem, Griffin wants to see crypto projects forced to offer more transparency into their operations.
As of yet, Citadel has not publicly announced a planned rollout for this new crypto trading platform.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
