Tiger Brokers and Futu are planning to expand into cryptocurrency trading in an effort to turn volatile digital currencies into traditional assets.
Are brokers starting to shift their interests offshore?
Nasdaq-stock listed brokers unveiled their new business plans last month. The move came in the midst of China's crackdown on onshore trading and mining of digital currencies due to financial and environmental risks. Cryptocurrencies, which saw extreme price swings in May, split Wall Street, with Goldman setting up a dedicated trading desk, JPMorgan Chase allegedly offering a bitcoin fund for wealthy clients and Bank of America keeping its distance to date.
Beijing's war on cryptocurrency trading and mining has plunged bitcoin by 40% in the past month. The management teams at Futu and Tiger Brokers were quick to point out that the new bitcoin trading services were only targeting clients who are not based in mainland China.
Wu Tianhua, chief executive of Tiger Brokers said Tiger Brokers is backed by smartphone giant Xiaomi (Xiaomi shares - HKG: 1810) and "will not offer such a service to Chinese citizens", adding that it is in the process of applying for the "relevant licenses" governing cryptocurrency trading, without specifying which regulators are.
Tiger Brokers reported a net profit in the first quarter of the year of $ 21,1 million, compared to a net loss of approximately $ 200.000 during the same period a year ago. The broker allows you to trade shares listed on the US stock exchange, of Hong Kong, Australia and Singapore.
Futu also wants to offer virtual currency trading
Futu, backed by Tencent, which has had a strong push in Hong Kong's retail market in recent years, also said it will expand into digital currency trading in the second half of this year.
"We are in the process of applying for digital currency licenses in the US, Singapore and Hong Kong," said Robin Li Xu, senior vice president, during a Futu earnings conference call held on May 19.
Founded in 2012, Leaf President Li Hua envisioned Futu as the "Charles Schwab of China". But Shenzhen-based online brokerage has since embarked on a broader path of diversification.
With 790.000 customers, first quarter net income increased more than six times from the prior year to $ 149,5 million. In recent years Futu has focused on diversifying its business.
It has obtained a license from the Hong Kong Compulsory Pension Fund regulator to sell and market retirement plans to its clients.
The addition of cryptocurrency trading means it will need to obtain a virtual asset service provider license from the city's securities regulator.