Top Market Makers Jane Street and Jump Crypto Pare Down US Crypto Operations Amid Regulatory Pressure

Two prominent market-making firms, Jane Street Group and Jump Crypto, are cutting back their digital asset trading activities in the US due to heightened regulatory pressure. 

Jane Street is also scaling back its global crypto ambitions due to regulatory uncertainty, which makes it difficult for the company to operate in a way that meets regulatory standards in the US, Bloomberg reported Wednesday, citing people familiar with the matter. 

While both firms are still actively making markets in cryptocurrencies, they are doing so on a smaller scale than before. The duo does not plan to abandon crypto completely. 

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

This has led regulators to take a closer look at trading platforms, stablecoin issuers, and brokers.

Just recently, Coinbase, the largest US crypto exchange, received a warning earlier this year from the Securities and Exchange Commission (SEC) about potential enforcement action.

Jane Street and Jump Trading Faced Regulatory Scrutiny

Both Jane Street and Jump Trading have faced regulatory scrutiny in the US following the recent crypto meltdown that saw a number of high-profile crypto companies collapse. 

Specifically, Jump Crypto, which was a significant backer of Terra since 2019, was questioned by US prosecutors in a probe of the failed TerraUSD stablecoin project. 

Jane Street was also among the three US quant-trading firms cited by the Commodity Futures Trading Commission in its lawsuit against Binance as an example of how US-headquartered clients were able to access the platform despite Binance’s promises to exclude them.

Jane Street is known for its dominance in markets such as exchange-traded funds and corporate bonds and has been executing crypto trades since 2017.

Several of its alumni have gone on to work at crypto-focused firms, including FTX and Alameda Research. 

Sam Bankman-Fried, the disgraced founder of crypto exchange FTX, himself worked at Jane Street before founding Alameda in 2017. Caroline Ellison also worked at the New York-based company before leaving it to join Alameda. 

Meanwhile, the recent regulatory crackdown on cryptocurrencies has prompted many digital asset firms to look overseas for new opportunities.

Earlier this week, Coinbase announced that it is in discussions with Abu Dhabi Global Market (ADGM) regulators and Dubai’s Virtual Assets Regulatory Authority (VARA) about its activities in the region, adding that it is considering setting up a hub in the country. 

More recently, global crypto-focused financial services firm Galaxy Digital revealed that it is moving its operations offshore, as the firm sees no regulatory clarity in the US.

Galaxy Digital boss Mike Novogratz said during a first-quarter earnings conference call on Tuesday the firm would “grow outside of the US, at a much quicker pace than we were growing in the United States.”