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Interactive Brokers to Bring Crypto Trading to its US Customers
IBKR's clients have much larger more established portfolios than platforms like Robinhood.
Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
Managing $364.6 billion of client equity, Interactive Brokers has opened up crypto trading for its users thanks to Paxos blockchain integration. With inflation projections soaring, will IB’s clientele tap into Bitcoin to safeguard its wealth?
Being Highly Regulated Continues to Pay Off for Paxos
This year has been a prolific one for Paxos. After partnering with PayPal to enter the UK crypto market and the Bank of America to settle stocks on blockchain, Paxos is now making a big move with trading brokerages as well.
As of yesterday, September 13th, Interactive Brokers Group (IBKR) had announced cryptocurrency trading and custody on their platform. Paxos will provide the necessary blockchain infrastructure to make it happen.
Charles Cascarilla, CEO and Co-Founder of Paxos, said this on the new partnership with Interactive Brokers Group:
“Paxos provides the regulated blockchain infrastructure to ensure enterprises can enable crypto safely and with reduced risk”,
IBKR will offer top cryptocurrencies for trading and custody services: Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) and Bitcoin Cash (BCH). To accommodate the new service, IB is also integrating Paxos Crypto Brokerage as a seamless API (Application Programming Interface) solution for its platform. Meaning, the existing IB platform will link up with Paxos.
With this news, IKBR is the latest in line to join the fusion of FinTech with the crypto space. The most popular trading broker, Robinhood, had launched its crypto offering in 2018. Presently, Robinhood offers 7 cryptocurrencies, having Bitcoin Satoshi Vision (SV), Ethereum Classic (ETC) and Dogecoin (DOGE) as three extra digital assets IKBR saw fit to exclude.
The question is, what kind of revenue does IKBR expect from crypto trading?
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Interactive Brokers Group Caters to a Different Audience
It is telling that, despite DOGE exerting more cultural weight than Litecoin and Bitcoin Cash, IBKR chose not to include it on the supported list. You may recall that crypto trading netted 50% of Robinhood’s Q2 2021 revenue, with DOGE in the lead.
This reveals a different marketing approach befitting different customer bases. As the broker that pioneered zero-commission trading, it is predictable that Robinhood would attract millennials – its core user base has an average age of 31 – who are more likely to invest in meme coins. This also means that Robinhood’s average account size is the smallest, at $3,500, according to Business of Apps.
On the other hand, Interactive Brokers Group is an old-school trading platform, founded in 1978 and incorporated in 1993. Despite the age difference, IB’s market cap is at $25 billion, 34% lower than Robinhood. However, the average IB account size is drastically higher – at $250,000, over 70 times larger than Robinhood.
As of September, IBKR serves 1.49 million clients, a 57% increase from the previous year, but still 12 times lower than Robinhood’s user count. The average Interactive Brokers client age is higher than Robinhood’s, at 42 years old. In turn, this would indicate that we may see a new wave of crypto investments.
When The Tokenist compared Bitcoin adoption rates between 2017 and 2021, a consistent result popped up. Higher age correlates with an unwillingness to directly own crypto assets, even if there is familiarity with the pros and cons. Therefore, IB’s venture into crypto custody services for wealthy clients would certainly open the door for them to take the crypto plunge.
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Older Investors as the New Crypto Frontline?
The UK’s Post Office has recently announced it will be issuing crypto vouchers across its numerous branches, covering around 17 million customers. Bitcoin (BTC) and Ethereum (ETH) vouchers will be provided by Berlin-based Swarm Markets, via the Post Office EasyID app.
This represents another clear trend toward unification of identity with wider financial services. Because FinTech platforms tend to be modular, it is then easy to onboard new ones, resulting in top cryptocurrencies becoming beneficiaries of this trend. However, one should also consider it as habituation to digital assets, ending on a road to CBDC implementation.
Do your grandparents see Bitcoin as shifty speculation or as digital gold? Let us know in the comments below.
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