Bridging the Divide
Kraken’s strategic partnership with Deutsche Börse is expected to result in a range of new products and services across trading, custody, settlement, collateral management and tokenised assets. But it may also serve as a template for other link-ups.
The agreement between the US-based cryptocurrency exchange and the Frankfurt-headquartered international exchange and market infrastructure provider promises to remove a number of obstacles that have deterred clients from moving between fiat currency and crypto, such as cost and time.
As discussed elsewhere in this column, institutional investors are the holy grail for crypto exchanges – so if Kraken and Deutsche Börse can jointly smooth the transition for investors moving between traditional securities and digital assets, they will contribute significantly to the institutionalisation of cryptocurrency markets, particularly in Europe.
In addition to connecting Kraken clients to 360T, the companies have said they will develop white label solutions that enable financial institutions to offer crypto trading and custody services. This is potentially significant for firms that lack the technical know-how to develop their own infrastructure.
We just announced a groundbreaking partnership with Deutsche Börse Group to bring TradFi & crypto closer than ever.
— Kraken (@krakenfx) December 4, 2025
FX via 360T is phase one. Derivatives, enhanced liquidity, Embed, & xStocks are next.
Institutional access is getting a serious upgrade.https://t.co/rtunQkmtyn
Kraken will extend its American services to institutional clients of Deutsche Börse who are seeking exposure to cryptocurrencies. In turn, Deutsche Börse will make its European infrastructure available to Kraken’s clients worldwide.
The parties will hope that this arrangement provides a solution to the regulatory challenges that have complicated cross-border cryptocurrency trading for institutions.
The collaboration has the potential to speed up the adoption of compliant digital asset exposure among asset managers and banks. From a fintech perspective, it suggests that the convergence of digital and traditional markets is happening at a much faster pace than previously expected.
Other financial institutions will undoubtedly be keeping a close eye on how this develops as they consider similar tie-ins to tap into unmet demand for crypto assets.
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Spot Crypto Trading Gathers Pace
References to “golden ages” typically reflect nostalgia for a perfect past that never really existed, as well as optimism for a better future. Given Donald Trump’s fondness for all things gold (see his tasteful redesign of the Oval Office, for example), it should not be surprising that he has used this phrase repeatedly to describe his ambitions for cryptocurrency in the US.
Trump is now remodeling the Oval Office to cover it in gold after ordering a $200 million golden ballroom.
— No Lie with Brian Tyler Cohen (@NoLieWithBTC) August 7, 2025
All after cutting 17 million Americans’ health care and taking food away from hungry children. pic.twitter.com/JtCJMaGzwd
The latest phase of this broader vision came late last year when the acting chair of the Commodity Futures Trading Commission (CFTC) announced that listed spot cryptocurrency products would begin trading for the first time in US federally regulated markets on CFTC-registered futures exchanges.
This move could allow market participants to carry out complex trading strategies such as the “basis trade”, which involves taking advantage of the price difference between spot and futures markets and can only be done if the trader holds both assets.
The CFTC said it has a “rich history of welcoming responsible innovation on futures exchanges by balancing regulatory flexibility with core principles that protect both institutional and retail traders”. It added that recent events on offshore exchanges showed how important it is for Americans to have greater choice and access to safe, regulated US markets.
As well as fuelling Trump’s narcissism (perhaps she should have referred to a “golden ego”), Caroline Pham also praised her own role, suggesting that the requirement for leveraged retail commodity trading to take place only on futures exchanges had existed for 15 years, and that it was only under her leadership that the regulator had provided clarity on how to list these products.
To be fair, Pham does have a point, as previous high-profile enforcement actions against firms accused of running unregistered platforms point to regulatory uncertainty.
The new regime should attract institutional investors who have been put off by concerns around custody and market transparency. However, exchanges will need to reassure this group that they have strong controls in place to prevent practices such as the simultaneous or near-simultaneous buying and selling of the same financial instrument to create a false impression of high trading volume and demand.
Don’t Lose Your Concentration
One of the major themes of 2025 was the steady rise of tech stocks and the resulting concentration in US and global large-cap indices. The last time the US equity market accounted for such a high share of global equity markets, American combat troops had just left Vietnam, and the final mission of the Apollo space programme had landed the last man to walk on the Moon.
Conventional wisdom suggests that the dominance of tech stocks in the S&P 500 creates significant concentration risk for investors whose portfolios are heavily weighted towards these names. The internet is full of articles warning about the dangers of relying on a small number of stocks and offering advice on where traders should look for value and diversification.
2025 final performance:
— Brew Markets (@brewmarkets) December 31, 2025
S&P 500: 16.39%
Nasdaq: 20.36% pic.twitter.com/OeMeVcXef4
But what if concentration is a blunt way of measuring risk? Hollie Briggs, head of global product management for Loomis Sayles’ growth equity strategies team, believes the unintentional concentration investors get when buying an index such as the S&P 500 is very different from the deliberate concentration achieved by skilled investors. She also says there are clear steps investors can take to reduce concentration risk while keeping exposure to US growth stocks.
“If you have passive exposure to a cap-weighted equity index, then as stock prices rise and short-term investors chase momentum, your portfolio becomes more concentrated in these stocks,” she explains. “For passive investors who bought exposure to a cap-weighted index believing it offered a broad mix of investments, this can increase downside risk because their holdings become unintentionally focused on fewer stocks.”
Briggs contrasts this with active concentration, where investors choose not only which stocks they hold, but also the size of each position, based on long-term value.
She also believes that owning a larger number of stocks does not always mean a portfolio is less risky, pointing to research suggesting that the benefit of adding more stocks falls sharply as the number increases.
