Risk management Stuttgart, the respectable German face of cryptocurrency trading

Virtual currencies may rise or fall, but market operators continue to earn good money from the business. Germany's second-largest stock exchange joins the fray – at a safe distance.
To have and to hold, at least for a while.

"Trade cryptocurrencies quickly and effortlessly," the Stuttgart Stock Exchange gushes on its website. Its managers hope investors will be bullish on Bison, a new crypto trading platform to be launched this fall in the southwest German city. Bison, they claim, will “show you the bright side of the crypto world without any complicated processes." Rather than seek out online marketplaces for deals in Bitcoin, Ethereum and other virtual currencies, investors can buy and sell them directly on Bison, which features an electronic wallet and portfolio.

Germans are not renowned for either their digital savvy or speculative verve, but they’re forging into the risky world of cryptocurrencies with a vengeance. Berlin is the “crypto capital of Europe, if not the world,“ the boss of Etherium, Fabian Vogelsteller, said earlier this year. Stuttgart, the country’s biggest stock market after Frankfurt, is the first traditional German exchange to open cryptocurrency trading, and even has plans to enter the market for Initial Coin Offerings – ICOs, a controversial business of virtual IPOs.

Established players such as Stuttgart are eyeing the lucrative business of rapidly growing crypto exchanges such as Coinbase, Kraken and Bitflyer. It’s treacherous terrain, not least because the regulatory framework hasn’t been hashed out. But the Germans know the clock is ticking. Just last week, the world's second-largest exchange operator, London-based ICE, announced far-reaching plans for a crypto trading platform. The New York Stock Exchange also wants to start trading virtual currencies this fall, hoping to beat NASDAQ to the punch.

08 p29 Not a dull moment-01

The time when Bitcoin buyers became millionaires overnight might well be over, leaving many investors disillusioned. Crypto exchange operators, however, are in an enviable position. With a global trading volume of as much as $70 billion (€60.4 billion) every day, the market offers handsome returns to operators even if trading fees are just a few percent.

This involvement, however, could easily backfire. The crypto landscape is often opaque and bristling with dangers that could seriously dent an exchange’s image and destroy investor trust. Stuttgart is aware of the balancing act: The developer and operator of Bison isn’t the stock exchange but Sowa Labs, an Ulm-based startup it bought last December.

"Bison is a crypto-trading app, not a crypto exchange," explains Ulli Spankowski, the boss of Sowa Labs. This means that Bison is linked to cryptocurrency exchanges and uses their reference prices, but at a respectful distance to their new owner’s repute.

Felix Holtermann and Astrid Dörner cover finance for Handelsblatt from Düsseldorf and New York, respectively. Jeremy Gray, an editor at Handelsblatt Global, adapted this story into English. To contact the authors: [email protected] and [email protected]