STS Digital's Institutional Bet Pays Off as CME Chases Crypto Options Trading

While it may seem that larger firms getting deeper into crypto will push out 
digital-asset natives, that's far from the truth – or so says Maxime Seiler, the co-founder of STS Digital, a crypto options platform focused on institutions.

Last week, the Bermuda-based firm raised $30mn from a host of crypto-centric 
investors to catapult its business. Seiler told Sandmark that the interest of large traditional players is proof that STS’s focus and business model is sound. 

The CME equation

The Chicago Mercantile Exchange (CME), the largest derivative platform in the world, is taking a landmark step and will introduce round-the-clock crypto futures and 
options trading on 29 May. 

Driven by institutional demand, the CME will fill a gap in the high-volume crypto derivatives market, offering 24/7 functionality to institutions looking to meet their hedging and trading needs. With few TradFi firms offering such a service, institutions were until now obliged to turn to the crypto-native sector.

In Seiler's view, CME's move is more likely to eat into the business of retail crypto firms, rather than their own. If institutions are looking to trade beyond Bitcoin, they will require the services of niche players like STS Digital, he said.

Altcoins – tokens other than Bitcoin and Ether – are another matter. Altcoin options have irregular liquidity on non-specialized platforms. Immediate settlement of options deals isn't guaranteed, as trading is generally dependent on where major holders are located and in what time zone. STS automates the trades and ensures they are settled instantly.

"We don't see CME as a competitor to us," Seiler said. "It's a great progression for the market that we see traditional finance starting to adopt 24/7 markets and 
beyond crypto. I think it's very likely that they are at some point going to roll out 24/7 trading for traditional assets as well," he added.

Institutional appetite for crypto

STS Digital was founded in 2022 by Seiler, a former analyst at Credit Suisse and SEBA Bank, and his fellow TradFi veteran Gideon Hyams, an options trading expert. The founders believed that as institutional interest shifted toward crypto options, these firms would need expertise that went beyond the silos of traditional and digital trading. STS was created to bridge that gap.

Seiler and Hyams decided that being properly regulated would be vital when attracting institutional clients, as would be the ability to offer automated trade books to allow for round-the-clock trading of large contracts. A third essential in their armoury was having a technology that was already familiar to traditional firms.

Despite the market turbulence, crypto infrastructure and its integration with the global financial system are stronger than ever, Seiler said.  

"If you zoom out over the last four years, we're at a point where there is mass adoption from an infrastructure perspective. That means that all the different platforms in the traditional space are sort of thinking about how to expand their offering into crypto."

The Bermuda advantage

When STS’s founders were considering where to establish the business, they settled on Bermuda because of the island's role as a crypto pioneer. Its crypto framework and licensing regime, created in 2018, gave it a clear edge over other jurisdictions, along with its welcoming stance on digital currencies.

"Bermuda has created a framework that gives clear boundaries of what can and cannot be regulated," Seiler said. "That is already a huge difference because there are a lot of jurisdictions where you don't even have that clarity. So you start off by wondering, can we do this or not? Which is not the case with Bermuda."

STS's funding round has attracted some noteworthy crypto investors, including Payward, the parent firm of crypto exchange operator Kraken. Although Seiler didn't elaborate on any possible integrations, he did leave the door open for future opportunities.

Correction: the original version stated that Mr Seiler believes CME's move won't eat into the business of crypto firms. This has been amended to: In Seiler's view, CME's move is more likely to eat into the business of retail crypto firms, rather than their own.