Ben Strack

<div id="highlights-block_627ab46b155ca" class="highlights">
 <ul>
 <li>The company will provide $500 per month, financial literacy education, a zero-fee bank account and a Visa debit card to 100 Chicagoans</li>
 <li>As for future programs, FTX.US and the city are exploring how they could support Chicago residents with global remittances</li>
 </ul>
 
</div>



The US affiliate of Bahamas-based crypto exchange FTX has made Chicago its headquarters and is set to pilot a program focused on supporting the city’s underbanked communities.



FTX.US President Brett Harrison told Blockworks some of the largest exchanges, trading firms, hedge funds, fintechs and venture capital firms are based in Chicago, making it an ideal — if competitive — spot for recruiting.&nbsp;



The company is aiming to offer financial relief and economic mobility to residents in the city’s less-affluent Austin, Englewood and West Garfield Park neighborhoods.&nbsp;



FTX.US is partnering with nonprofit organization Equity and Transformation (EAT) in a one-year program to offer $500 per month in supplemental income, financial literacy education, a zero-fee bank account and a Visa debit card to 100 Chicagoans.



The move follows FTX.US’s <a href="https://cms.blockworks.co/ftxus-focusing-on-derivatives/" target="_blank" rel="noreferrer noopener">closing of a $400 million Series A round</a> in January, which valued the company around $8 billion. 



The initiative builds off of the <a href="https://www.chicago.gov/city/en/sites/resilient-communities-pilot/home.html" target="_blank" rel="noreferrer noopener">Chicago Resilient Communities Pilot</a>, a $31.5 million commitment from the city to combat pervasive poverty.



The program, which provides 5,000 Chicagoans with $500 per month for one year, is the largest municipal cash assistance program in the US, according to Samir Mayekar, Chicago’s deputy mayor of economic and neighborhood development. &nbsp;



“To be focusing truly on making their products and services accessible to those in need in Chicago, it’s a very innovative way to feature some of the unique benefits of blockchain technology in a way that can make a difference on the ground here in neighborhoods,” Mayekar told Blockworks.



An academic partner will conduct a research study examining the effect of the monthly $500 payments and financial inclusion services on residents&#8217; financial stability and economic mobility.



“We’ll be studying this program and seeing if this is a viable, scaling program to continue in this city in a larger way,” Harrison said.



<h3 class="wp-block-heading">Phase 2</h3>



Going forward, FTX and the city are looking into an additional program that would focus on how it could support Chicago residents with global remittances, which could launch before year end.&nbsp;



Chicago is an “immigrant friendly” city with many residents sending money to families in other countries, Mayekar said. He added such transactions can carry fees of 20% or more.



“Looking at a remittance pilot and leveraging the kind of power of the FTX platform to have basically no-fee cash transfers across borders where you’re also able to kind of hedge from volatile currencies, this could be incredibly powerful,” Mayekar said.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Brett Harrison

FTX Rolls Out Program To Support Underbanked Chicago Communities

<div id="highlights-block_6272e422d24e2" class="highlights">
 <ul>
 <li>ErisX, operator of crypto spot market, futures exchange and clearinghouse, to be rebranded as Cboe Digital </li>
 <li>Cboe is uniquely positioned to offer basis trading and exchange for physical transactions down the line after the acquisition, the company said</li>
 </ul>
 
</div>



Cboe Global Markets has closed its acquisition of institutional cryptocurrency exchange ErisX, with the newly combined company’s executives saying they intend to integrate quickly while digital asset markets remain hot.&nbsp;



Chicago-based Cboe first <a href="https://cms.blockworks.co/cboe-sees-enormous-future-for-crypto-as-it-acquires-crypto-market-provider-erisx/">announced the deal</a> six months ago.



ErisX operates a US-based digital asset spot market, as well as a regulated futures exchange and clearinghouse. Set to be rebranded as Cboe Digital, the business will function as a subsidiary run by ErisX CEO Thomas Chippas.



A company of 55 people at the time of acquisition, ErisX will now leverage Cboe’s more ample resources, Chippas told Blockworks.&nbsp;



“We get to find crossover opportunities and product development opportunities to grow the existing Cboe customer base, but [we have] complete freedom to continue new digital asset products over here at ErisX,” Chippas said.&nbsp;&nbsp;



Cboe Chief Operating Officer Chris Isaacson called the acquisition “super complementary,” adding it gives the company its first presence in the digital assets sector.



“We’ll integrate only where it makes sense, but we realize that in this asset class we need to move quickly,” he told Blockworks. “Keeping that agility with this wholly-owned subsidiary is a great move.”&nbsp;&nbsp;



Cboe operates the largest options exchange in the US. An average of $86.5 billion is traded on Cboe’s equities exchanges daily. The average number of US options contracts and US futures contracts traded each day total roughly 9.8 million and 213,000, respectively.&nbsp;



<h3 class="wp-block-heading">Product plans</h3>



ErisX Chief Operating Officer Matt Trudeau said the highest priority for the company in the near term is adding margin capability to its clearinghouse. It has an application pending with the Commodity Futures Trading Commission (CFTC) to offer margin crypto futures that are both physically settled and cash settled.



The soon-to-be Cboe Digital will also now look to expand its spot offerings beyond bitcoin, bitcoin cash, litecoin and ether.



Down the line, Cboe is uniquely positioned to offer products, such as basis trading and exchange for physical transactions, that involve both the spot and futures markets, Trudeau told Blockworks.



“One of the things we expect to be able to do is offer those products more efficiently from an operational and cost standpoint than anybody who’s got a standalone cash-settled futures market or a standalone spot market,” he said.



Cboe also intends to develop a benchmark data stream — based on actionable bid and offer prices from the spot crypto market — to help market participants evaluate the appropriateness of crypto execution prices, the company said in a statement.



<h3 class="wp-block-heading">Bridging TradFi and crypto</h3>



Isaacson said part of the attractiveness of buying ErisX was the company’s “intermediary-friendly platform.” The deal was estimated at $400 million, according to data by M&amp;A advisory firm Architect Partners. The companies did not disclose the sale price.&nbsp;



“It will allow for traditional finance players that are more and more capable and ready to adopt digital assets to now come on and adopt the asset class,” he said.



Ryan McCulloch, an investment banking associate at <a href="https://www.architectpartners.com/" target="_blank" rel="noreferrer noopener">Architect Partners</a>, said in a research note that the need for traditional financial players to have crypto exposure has become “table stakes.” He likened the Cboe-ErisX deal to other so-called “bridge transactions” between companies, such as Deutsche Borse Group and Crypto Finance; Mastercard and Cipher Trace; and PayPal and Curv.



“As the crypto sector develops, consolidation via acquisition will continue as traditional players continue to choose the buy over build option,” McCulloch wrote. “ErisX isn’t the largest crypto derivatives exchange, but their focus throughout development on robust regulatory compliance is a major driver of value to traditional financial players such as Cboe.”



Many traditional institutions are already getting involved in crypto, Chippas said, adding that there is a massive opportunity to grow the pie.&nbsp;&nbsp;



“There are lots of people today that want to access these products that are unwilling to open an account for one asset class at one particular provider,” he said. “They’re looking to access these products via the traditional intermediaries.”



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

acquisition

Cboe Sees ‘Need to Move Quickly’ in Crypto Following Exchange Acquisition

Casey Wagner

<div id="highlights-block_6155f90ef4dc0" class="highlights">
 <ul>
 <li>Chicago is already a financial hub, now Rep. Margaret Croke wants to add crypto to the list</li>
 <li>House Bill number 3968 passed the Illinois House in April and is set for a Senate vote as soon as mid-October</li>
 </ul>
 
</div>



As federal agencies struggle to agree on digital asset jurisdiction, state legislators are leading the way on cryptocurrency regulation, and Illinois state Representative Margaret Croke (D-12th district) is the latest example.&nbsp;



“We are so much more nimble at the state legislature and get along with our colleagues so much more than on a federal level,” Croke said. “It&#8217;s funny because on the federal level for some reason we&#8217;ve gotten to this weird sentiment of ‘Republicans are pro-crypto’ and ‘Democrats are anti-crypto.’”&nbsp;



Croke, a democrat, is the chief sponsor of a House Bill number <a href="https://www.ilga.gov/legislation/BillStatus.asp?DocNum=3968&amp;GAID=16&amp;DocTypeID=HB&amp;SessionID=110&amp;GA=102" target="_blank" rel="noreferrer noopener">3968</a>, a digital assets-focused proposal that would allow financial technology companies in the state to hold cryptocurrencies. The bill passed unanimously through the Illinois House in April and will be up for vote in the Senate as soon as mid-October.&nbsp;



The proposed policy is similar to state laws in Wyoming, which pioneered the acceptance of cryptocurrency banks in 2020.&nbsp;



“The bill creates a special purpose trust company, so essentially it creates a charter system similar to Wyoming,” Croke said. “Except, you are better off, in my opinion, partnering with an existing financial institution in Illinois, which I think adds great benefits because we get FDIC insurance and can be a little bit more stable and safe with the crypto assets you&#8217;re a custodian of.”&nbsp;



The special purpose trusts will generally have to follow the same regulatory framework as existing corporate fiduciaries, but the bill will also include new policies associated with digital assets. These include rules that will oversee capital and liquidity requirements and collateralization of fiduciary assets.&nbsp;



Croke first became interested in digital assets and regulation after reading a <a href="https://www.idfpr.com/Forms/2020%2001%2012%20Blockchain%20Report.pdf" target="_blank" rel="noreferrer noopener">study</a> from the Illinois Department of Professional Regulation that discussed crypto’s implications and policy suggestions.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“I started thinking that it would be a good thing for legislators, especially maybe one that was on the younger side,” Croke said, referring to herself, “to have a good understanding of crypto because I think that we are going to go down the path of regulation.”&nbsp;</blockquote>



Croke previously served as the deputy chief of staff at the Illinois Department of Commerce and Economic Opportunity. She has been an Illinois representative since January 2021 and has sought to change the state’s perception.&nbsp;



“I love everything that promotes Illinois as a state that you want to come to and grow your business,” she said. “Because sometimes, when thinking of Illinois, or Chicago, the first things that people tell me that they know are Al Capone, and we&#8217;re experiencing some gun violence and the Windy City and things like that, but you don&#8217;t always hear that we&#8217;re an economic powerhouse.”&nbsp;



The bill, Croke said, has been well received, even from her peers that have not done significant research into digital assets. A bill suggesting greater regulation around digital assets while also opening the door for greater business opportunities is a hit on both sides of the aisle, she said. What has been the most surprising though has been the support from financial institutions.&nbsp;



“The banking industry in Illinois is very excited about this bill, and usually that doesn&#8217;t happen,” she said. “They don’t typically like change, but this is different because they can now partner with crypto companies or they can start doing this on their own if they want.”  



As for those who are looking to become their own crypto company without interference from a bank, there is room for these players, too, Croke said. But they should expect to follow the same rules as existing financial institutions.&nbsp;



“I think that&#8217;s a fair thing to ask.”

Chicago

Newsletter

Blockworks Research