Leading cryptocurrency trader Coinbase moving an exchange to Chicago – Finance News – Crain's Chicago Business
San Francisco-based Coinbase is making a big move into Chicago, bringing the backbone of its system to the city.
Coinbase plans to transfer its current exchange to Chicago and overhaul it using the city’s trading tech talent to upgrade the matching engine, says Paul Bauerschmidt, who was recently hired to oversee the company’s new Chicago office. The rebranded Coinbase Markets infrastructure will be rolled out over the next year.
Coinbase operates one of the biggest cryptocurrency exchanges in the U.S. with what it says is $20 billion in assets on its worldwide platform, and 20 million users.
Hundreds of cryptocurrencies, anchored by the most popular—bitcoin—have catered mainly to retail traders, with a major following in Asia. They have also attracted a lot of interest from Chicago’s high-speed trading community and are increasingly drawing attention from major financial companies, like Goldman Sachs.
“It’s about professionalizing the market, while maintaining our roots in retail,” Bauerschmidt said in an interview.
Bauerschmidt, who was recruited by Coinbase in October, was formerly head of futures exchange CME Group’s swaps execution facility, and more recently, managing director of products and services at Chicago-based Eris Exchange. He will head the product side of the business in Chicago and expects it to expand from six employees today to about 35 over the next year, and 90 to 100 in the city in three years, he said.
Bauerschmidt is leading the office with Derek Groothuis, who will oversee the engineering side of the operation. Groothuis was formerly chief software officer at DRW Trading, one of Chicago’s biggest trading firms and a major player in the cryptocurrency space.
“The market community in Chicago plays a very important liquidity provision role in the crypto markets today,” Bauerschmidt said. “There’s a tremendous amount of experience in the city today.”
Coinbase currently has a total of 300 employees, with offices in San Francisco; Chicago; Portland, Ore.; London; and a growing presence in New York.
As part of its push to lure more professional and institutional traders into the crypto market, Coinbase is also launching a new platform, Coinbase Prime, designed for that crowd. The company’s Gdax operation will transition its institutional clients to the new Coinbase Prime system but continue to serve its retail clients, said a spokeswoman for the company, Chelsea Slaggert.
Another major U.S. exchange is also migrating to Chicago. San Francisco-based Kraken recently hired Steve Hunt, Jump Trading’s former chief technology officer, to plant a stake in the city and pursue recruiting. It was also a big sponsor this month of the annual Chicago Trading Show, which drew nearly 1,200 attendees—its largest crowd ever.
DRW’s Cumberland Mining has led the charge in Chicago’s entry into the cryptocurrency arena, buying and selling bitcoin, ether and iota, among other cryptocurrencies, with counterparties in 35 countries.
Jump Capital (the arm of Jump Trading active in crypto assets), DV Trading’s DV Chain and other Chicago firms are also trading in the market. Other industry professionals are attempting to start new Chicago-based cryptocurrency exchange companies and creating investment funds to buy into the currencies.
The Chicago exchanges at the heart of the city’s trading ecosystem are also getting into the act. CME Group, the world’s largest futures exchange, this week kicked off an ether benchmark rate and index, perhaps foreshadowing a futures contract tied to the cryptocurrency. Last year, it released its inaugural bitcoin futures contract.
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