Ultimate Resource For Tokenized Securities And Blockchain Stock-Settlement Network
Bank of America Corp. joined the network created by Paxos Trust Co. to settle stock trades in minutes rather than days by using blockchain, the latest sign of Wall Street’s growing adoption of the technology. Ultimate Resource For Tokenized Securities And Blockchain Stock-Settlement Network
The second-biggest U.S. bank joins Credit Suisse Group AG and Nomura Holdings Inc.’s Instinet on the Paxos Settlement Service. In 2019, the Securities and Exchange Commission allowed Paxos to begin a pilot program for settling equity trades.
Bank of America has been conducting internal transactions for the past few months and, if approved as a clearing agency, will offer the service to clients next, said Kevin McCarthy, head of financing and clearing at the Charlotte, North Carolina-based firm.
The Paxos system is one of several areas where banks are using blockchain to reshape how they interact with markets. JPMorgan Chase & Co. has been using a version of Ethereum to execute overnight repurchase agreements since late last year, with daily transactions exceeding $1 billion. Goldman Sachs Group Inc. is preparing to join that market as well.
McCarthy said the flexibility and cost savings offered by Paxos appealed to the bank.
“We can determine the settlement cycle down to T+0,” he said, referring to a settlement that happens at the same time or on the same day as the trade. “We then can free up the collateral we’d have to post on an overnight basis,” which could lead to big savings. “The return-on-assets in this business would improve, which has been a challenge,” he said.
The move to more flexible and speedier stock settlement could pose a threat to the Depository Trust & Clearing Corp.’s half-century dominance in equity markets. Only trades logged by DTCC by 11:30 a.m. are eligible to be settled that day. That misses about 75% of all stocks traded on a given day, according to Paxos Chief Executive Officer Chad Cascarilla.
The current settlement time is about two days, during which money to sellers from buyers is stuck in the market’s plumbing.
That’s a relative eternity when trades can happen in milliseconds. The Paxos system connects investors directly using a version of the Ethereum blockchain. The DTCC is working to shorten its settlement times and offers same-day settlement for some trades.
The equity market is big enough for multiple settlement systems, said Bina Kalola, BofA’s head of global banking and markets financial technology innovation and investments.
“That flexibility and change in workflows to bilateral settlement is very interesting,” she said, noting it’s important that Paxos has a link to the DTCC and that there has been broad cooperation. “Everyone is partnering and that’s critical.”
Paxos raised $300 million from investors last month, giving it a valuation of $2.4 billion.
Pushing blockchain acceptance in banking and other industries is key for the technology to succeed, Cascarilla said.
“The way we get mainstream adoption is by having firms like Bank of America come on and feel comfortable,” he said.
Kalola said the lender is serious about exploring new ways to adopt innovation to the current market structure.
“We will go through this journey together, and the collaboration and partnerships really matter,” she said. “We will see a new way of doing things that will benefit everyone.”
Paxos Adds Wedbush Securities In Quest For Same-Day Stock Settlement
Credit Suisse, Instinet and Societe Generale are also part of the program, which is meant to shrink stock settlement times to hours, not days.
Wedbush Securities has joined the Paxos Settlement Service, a post-trade settlement platform for U.S. securities that uses blockchain technology for faster and more transparent results.
The investment firm, with $2.4 billion under management, has been bullish about blockchain and cryptocurrency since back in the early days, as well as being a longtime innovator in securities clearing.
Wedbush joins Credit Suisse, Instinet and Societe Generale in the Paxos program, which is built using a permissioned fork of Ethereum that allows two parties to bilaterally settle securities trades directly with each other.
Paxos recently tested same-day settlement of trades on the blockchain, a practice that looks all the more compelling in light of the share-trading fiasco involving the Wall Street Bets movement and trading platform Robinhood.
“It’s crystal clear that blockchain technology is destined to completely modernize securities settlement and custody,” Wedbush CEO Gary Wedbush said in a statement.
Paxos’ Stock Push
Paxos currently operates its blockchain-based settlement system under a “no-action” promise from the U.S. Securities and Exchange Commission (SEC) – basically when the regulator accepts a common-sense approach to something that is not technically legal.
Meanwhile, Paxos is applying to become a clearing agency with the SEC, which would make the cryptocurrency custodian one of just two clearing agencies in the U.S., joining the Depository Trust & Clearing Corporation (DTCC).
“U.S. equities settlement is opaque and relies on outdated technology,” Charles Cascarilla, CEO and co-founder of Paxos, said in a statement. “The Paxos Settlement Service reduces risk, enables greater trading liquidity and provides ownership transparency, which will revolutionize securities markets.”
Paxos closed a $300 million Series D in April that valued the firm at $2.4 billion.
Morgan Stanley Co-Leads $48 Million Investment To Bring Blockchain To Capital Markets
Digital securities platform Securitize has big plans to drive adoption of tokenized securities after raising $48 million in a Series B funding round led by Blockchain Capital and investment funds managed by Morgan Stanley.
This appears to be Morgan Stanley’s first dedicated investment in the crypto space, however it is not new to the industry. As of January 2021 they own 10.9% of the largest corporate bitcoin holder, MicroStrategy, and started offering some wealth management clients bitcoin exposure. On the enterprise side, corporate bond communication platform DirectBooks, which is partially-owned by Morgan Stanley, partnered with blockchain startup Axoni in February.
Following the round, co-head of the Morgan Stanley team, Pedro Teixeira, will become the fifth member of Securitize’s board of directors. Other investors in the round include Ava Labs, IDC Ventures, Migration Capital, NTT Data, Sumitomo Mitsui Trust Bank, Blockchain Ventures, Borderless Capital, Global Brain, Mouro Capital, Ripio, Ripple and SPiCE VC.
“We make long-term investments in businesses and asset classes that are ahead of the curve. Our investment in Securitize is a sign that we believe in the growth and adoption of digital asset securities,” Teixeira said.
Founded in 2017, Securitize’s core product is a digital securities protocol which allows users to issue, hold and trade digital securities, think a tokenized version of Apple stock, with automated compliance features built-into the service through automated code called smart contracts.
Fake Tesla, Apple Stocks Have Started Trading On Blockchains
For years, the powers that be on Wall Street have toyed with questions about whether it would be feasible to move the stock market onto a blockchain, the underlying technology behind cryptocurrencies.
The innovators in the fast-moving world of decentralized finance — or DeFi — aren’t waiting around to see how those discussions unfold. Instead, they’ve built synthetic versions of equities that track some of the world’s biggest companies. In essence, the anti-establishment ethos of the crypto world is being applied to a rough facsimile of the stock market.
Fake versions of Tesla Inc., Apple Inc., Amazon.com Inc. and other big stocks, as well as a few popular exchange-traded funds, have been created by the projects Mirror Protocol and Synthetix over the past year. The tokens, and the programming that allows them to trade, are engineered to reflect the prices of the securities they track without any actual purchases or sales of the real stocks and ETFs involved. So far, volumes are just a tiny fraction of those on regulated exchanges. But for crypto enthusiasts, the potential upside is huge.
The synthetic shares join a strange new world of assets such as digital artwork and highlights of NBA games now trading on blockchains. Yet, unlike the modern art and dunks of the non-fungible token universe, these instruments raise questions about how they fit into a global stock market and brokerage industry governed by thousands of pages of rules from dozens of countries.
At the moment, it’s a case of innovation that’s way ahead of regulation.
Which is exactly how Do Kwon likes it. The co-founder and CEO of Terraform Labs, the South Korean company that created the Mirror Protocol on its Terra blockchain, Kwon fancies himself as a sort of modern-day Robin Hood of finance — in the mode of Vlad Tenev or Chamath Palihapitiya.
DeFi “is so powerful in unlocking financial services for disenfranchised people around the world,” he said via email, that “it’s better to move fast and break things. Waiting for fragmented regulatory frameworks to crystallize before innovating is counterintuitive.”
For Kwon and other proponents of these new synthetic assets, avoiding the various rules and barriers of the financial world is a feature, not a bug. It opens up opportunities for wealth creation currently only available to a fortunate few, he said. Users can trade the tokens anonymously 24 hours a day, seven days a week, from anywhere, unhindered by capital controls, “know your client” rules imposed on broker-dealers, and other frictions of the traditional financial system.
Kwon said Terraform Labs doesn’t generate any revenue from fees charged on the Mirror Protocol. Those go to users as an incentive to provide liquidity. Rather, the firm profits via a cryptocurrency it created that tends to increase in value as projects like Mirror grow in popularity.
So how exactly do these synthetic equities work? Well, it’s complicated.
But to oversimplify, under the Mirror Protocol, the idea is to keep prices of the synthetic — or “mirrored” — equities in the ballpark of the real thing by offering incentives for traders to arbitrage price discrepancies and manage the actual supply of tokens. Users can create, or “mint,” new tokens when prices are too high by posting collateral, and destroy, or “burn,” tokens when prices are too low, driving the price up or down.
Through these incentives, the “synths closely track the price of the real-world asset,” Kwon said. “But they’re still only tokens on a blockchain providing explicit price exposure.”
The tokens trade on decentralized, automated markets like Uniswap and Terraswap, which allow users to buy and sell the assets directly on the blockchain — a different model than centralized crypto exchanges run by the likes of Coinbase Global Inc. and Binance.
So far, trading volumes likely aren’t high enough to cause executives at Nasdaq or the New York Stock Exchange to lose much sleep. Mirrored Apple tokens, for example, have a market capitalization of about $34 million, according to Coinmarketcap.com. That compares with about $2.3 trillion for the real stock, and is around 1/1,000th the size of the novelty cryptocurrency Dogecoin.
A comparison of prices between various mirrored equities and the real securities at various times over the past week shows that the difference between the two can range from a penny to several dollars. For example, in afternoon trading on June 30, the price of Mirrored Tesla on CoinMarketCap.com was almost $6 higher than the $684 level the real shares were trading for on the stock market.
Yet, the projects bear watching by traditional finance institutions, given some of the ambitions in the DeFi space. As digital-asset management firm Arrington XRP Capital put it in a report analyzing and describing its support for Mirror, the goal of DeFi is not to simply improve a user’s experience with the banking system, but rather to dismantle it entirely. These new synthetic equities, the firm wrote, “are one of DeFi’s most obvious Trojan Horses into legacy markets.”
A spokeswoman for the U.S. Securities and Exchange Commission and representatives for Nasdaq, the listing exchange for most of the equities being copied by synthetics, declined to comment.
“Since these synthetic products are not regulated and not traded on a national securities exchange, I would think that the SEC would take issue with them,” said Joseph Saluzzi, the co-head of equity trading at Themis Trading who has provided testimony to Congress on market issues. “According to the SEC, their mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. This sounds like an investor-protection issue to me.”
Binance, the world’s biggest cryptocurrency exchange, has already drawn the attention of Germany’s financial regulator by offering tokens that are tied to the performance of popular U.S. stocks but backed by the actual equities. Binance may have violated securities rules when it issued the tokenized shares of Tesla, MicroStrategy Inc. and Coinbase, BaFin said in April.
Regulators could also start looking more closely at the DeFi space following some spectacular blowups in stablecoins — digital currencies designed to closely track the value of national currencies (and which Mirror traders use as collateral to mint new tokens). Dallas Mavericks owner Mark Cuban, an enthusiastic and influential investor in DeFi, recently called for regulations to address the cryptocurrencies after losing money when one crashed in value to zero.
Billionaire crypto investor Mike Novogratz, founder and chief executive of Galaxy Digital, recently tweeted that players in DeFi markets may regret it if they don’t start abiding by so-called know your client and anti-money laundering rules.
“Invest in a compliance layer now or pay the piper later,” he wrote. “If we want this ecosystem to grow we need to recognize we need to operate within the rules society sets.”
Starting to think that major DEFI protocols are going to have to decide if they are going to play by the rules that most countries want them to (KYC/AML), or if they are going to flip the middle finger at them. Invest in a compliance layer now or pay the piper later.
Kwon said Terraform Labs has not yet had any conversations with regulators in the U.S. or elsewhere about mirrored equities. Nor has the company communicated with exchanges such as Nasdaq, or the firms that manage the ETFs that have been mirrored.
But to stop mirrored stocks and other synthetic assets from trading, you would have to shut down the underlying open-source software code that makes up the blockchain and is used by a global user base that includes many anonymous players, he added.
“As long as there are ardent believers in the greater picture of what’s possible with the technology, shutting down crypto, DeFi, or synths is a Sisyphean task,” he said.
BofA Debuts Crypto Research Team In Latest Wall Street Push
Bank of America Corp. created a new team dedicated to researching cryptocurrencies, marking Wall Street’s latest push to capitalize on investors’ frenzy for digital assets.
Alkesh Shah will lead the effort, which will also cover technologies tied to digital currencies, and report to Michael Maras, who leads fixed-income, currencies and commodities research globally, according to an internal memo seen by Bloomberg. A spokeswoman for the firm confirmed the contents of the memo, declining to comment further.
“Cryptocurrencies and digital assets constitute one of the fastest growing emerging technology ecosystems,” Candace Browning, head of global research for Bank of America, said in the memo. “We are uniquely positioned to provide thought leadership due to our strong industry research analysis, market-leading global payments platform and our blockchain expertise.”
Banks have been increasingly looking to expand into the wild world of cryptocurrencies, with many pushing to offer wealth-management products or custody services for the asset class. Some banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., have begun offering crypto-futures trading.
Shah joined Bank of America in 2013 after stints at Morgan Stanley and Lehman Brothers Holdings Inc. and previously led Bank of America’s global technology specialist team. Mamta Jain and Andrew Moss will also join the lender’s research arm as part of the changes and continue to report to Shah, Browning said in the memo.
How To Launch An STO? Report Predicts Market To Reach $3B Valuation By 2025
Launching tokenized securities could be easier than one would expect. There are four main steps to make it happen, but it may take some time.
Security tokens may be poised for exponential growth as security tokenization industry players reveal optimistic forecasts based on surging demand. With that, the market size by 2025 could reach the $3 billion mark, according to the area2invest report, a security token marketplace.
The study by the Liechtenstein-based security token marketplace also suggests a market compound annual growth rate (CAGR) of 56.9%.
As Bernhard Thalhammer, head of issuer relations at area2invest, told Cointelegraph: “Every day, we receive several requests, not only from blockchain or crypto companies but also from more traditional businesses which have very concrete STO projects in mind.” He added: “We are actually quite surprised how well informed they are and how far they are in their decision-making process.”
Major institutions have already uncovered their security tokenization experiments, with recent examples include European Investment Bank, Thailand’s Central Bank, and the Union Bank of Philippines in collaboration with Standard Chartered Ventures.
This May, crypto exchange INX held the first security token offering (STO) registered with the United States Securities and Exchange Commission (SEC), with over $125 million in proceeds from the fundraising.
Despite STOs being more popular among companies across the blockchain industry, growth opportunities for the security token market may rely on businesses from traditional sectors, which have less experience with tokenization technology.
Eventually, security tokenization could upend the traditional stock and bond issuance model, but the knowledge gap puts the brakes on the STOs market growth in addition to the regulatory hurdles.
However, the security token issuance process is more straightforward than one would expect. It can be broken down into four steps, according to the area2invest report. The preparation for the token sale could take up to 18 to 24 weeks, followed by an investment period of 15 to 52 weeks.
The report suggests that the very first phase of an STO boils down to designing the ideal model of a security token offering and drafting the plan on how to bring the token to the market. At this stage, a potential issuer has to answer some questions about the investment idea, including the specifics of the oncoming investment product, the type of investor the product is aimed at and the target funding volume.
Recent STOs show that the digitization of the capital-raising process gives companies flexibility in terms of the type of securities they would like to issue and the kind of investors being targeted.
In April 2021, for example, the Exodus wallet completed an SEC-approved STO, offering its shares to both professional and retail investors through its wallet. The issuer can also opt for another combination. This May, the Singapore-based DBS Bank issued an $11.3 million digital bond, available for professional investors only.
Companies starting the security token offering journey also have to consider their marketing and distribution strategies, the entity that would be carrying out an STO, market sentiment analysis and the regulatory framework.
Drilling down into the aspects of the oncoming STO, the issuer has to eventually define the project budget — how much would it actually cost to hold an STO? Is the issuance justified by the numbers? “As with any issuance, there are initial fixed costs, which is also the case with STO, e.g. the prospectus. In addition, there are costs associated with the funding volume,” added Thalhammer.
Structuring An STO
With the plan of the security token offering in place, the issuer should have a more nuanced conversation about the financial aspects of the upcoming STO. The token price should reflect the real valuation of the company, so the issuer should consider a corporate financial advisery to confirm that the soft and hard caps match with the fundamentals.
Another question floating to the surface in the second phase is the rights and obligations the potential investors obtain, and how security tokens as a product should be structured to protect all of the STO participants.
One crucial task is to identify the most attractive jurisdiction for the issuance and ensure that the token offering is compliant with the country’s regulation in every requirement, including taxes. To scope out the most efficient routes to solve any legal issues, hiring a legal adviser is strongly recommended, according to the report.
FTX Integrates Copper Trading Tool ClearLoop
ClearLoop lowers risk by allowing institutional investors to hold on to assets until just before a trade is executed.
Crypto exchange FTX has integrated ClearLoop, a trading tool from infrastructure provider Copper.
* Copper introduced ClearLoop last year to remove the need for traders to deposit digital assets with an exchange in a hot wallet before being able to trade, a requirement that raised concerns the assets would be vulnerable to hacks.
* ClearLoop allows institutional investors to hold on to assets until just before a trade is executed.
* The integration will allow Copper’s client base of more than 300 institutional asset managers to trade FTX products with funds secured by Copper, according to an emailed announcement Tuesday.
* Clients are able to retain their trading capital, either in a cold wallet or a custodial solution, while trades are initiated. ClearLoop transfers the assets to the buyer through an exchange once the trade has been completed.
* The co-founder of FTX, Sam Bankman-Fried, said integration will enable the exchange to “stay ahead of the pack” through a “reduced level of counterparty risk required by many institutions.”
Cryptocurrency exchange FTX is joining Copper.co’s ClearLoop settlement trading network, which will allow it to gain new access to institutional funds.
Copper’s client base of more than 300 institutional asset managers will now be able to trade FTX’s products — which include derivatives, options and tokenized stocks — with their funds secured within Copper’s platform, according to a statement from the companies.
FTX, which handled $600 billion in trading volume in May, is the largest exchange yet to join the ClearLoop network. It has more than 1 million registered users, including institutional traders and family offices, according to the statement. Copper offers custody, prime brokerage and settlement services across 250 digital assets and more than 40 exchanges.
“Using a custodian is something we’ve been hearing again and again” for institutions to do crypto trading, said Sam Bankman-Fried, FTX’s founder and chief executive officer, in an interview. “A lot of people are going to want to use some sort of custodial network,” he said, noting that they’re trying multiple things because “I don’t think anyone really knows for sure what is going to end up mattering the most for institutions.”
The cryptocurrency space has matured significantly in the past couple of years, with institutional adoption a major narrative. High-profile market players like Paul Tudor Jones, Stan Druckenmiller, Bill Miller and Anthony Scaramucci have advocated buying into Bitcoin in particular, the largest and original cryptocurrency. At the same time, regulatory uncertainty, volatility and ease of use have held many investors back from jumping into crypto.
Deals like this, which help facilitate connections between institutions and crypto products, may make that easier — even if some of the shine is off crypto right now as Bitcoin trades around half its record-high level of close to $65,000 reached in mid-April.
“Our clients are some of the largest hedge funds in the world,” Dmitry Tokarev, founder and CEO of Copper, said in an interview. “For these guys, this is absolutely the Holy Grail.”
Billionaire SBF Says FTX May One Day Buy Goldman Sachs And CME
FTX CEO Sam Bankman-Fried has said that acquiring Goldman Sachs and CME “is not out of the question,” if the exchange beats competition from Binance and Coinbase.
Hong-Kong-based billionaire Sam Bankman-Fried has stated that FTX may consider buying U.S. financial giant Goldman Sachs and exchanges such as Chicago Mercantile Exchange (CME) in the future.
Speaking with the Financial Times on July 14, Bankman-Fried stated that if FTX can become the top crypto exchange and supplant rivals such as Coinbase and Binance, the idea of purchasing giants such as Goldman Sachs and CME group is not off the table:
“If we are the biggest exchange, [buying Goldman Sachs and CME] is not out of the question at all.”
The 29-year-old has an estimated net worth of $8.7 billion and is the founder and CEO of quantitative trading firm Alameda Research and CEO of the FTX crypto exchange.
According to data from Macrotrends, Goldman Sachs has an estimated market cap of $129 billion and the CME group has an estimated market cap of $75.5 billion.
While FTX has been growing rapidly, it’s not yet in the league of those giants. In an interview with Nikkei Asia on June 24, Bankman-Fried told the publication that FTX is seeking a valuation around $20 billion in its latest funding round, meaning it may be some time until FTX has the buying power to acquire such big firms.
But he does plan to buy smaller and medium sized ones. The entrepreneur said the upcoming funding round will raise “mid-hundreds of millions” primarily from institutions, and noted that “M&A is going to be the most likely use of the funds,” he said.
He also confirmed that the funds would be used to further target the retail investor share of the market.
Bankman-Fried also said FTX was in two minds about going public, saying that “we are not actively looking to list but we want to be in a position to go ahead if we want to,” and added that the firm is weighing up the benefits:
“We are in a fortunate position of not having to do it because we don’t need capital . . . on the other hand there are potentially big advantages to listing such as brand recognition.”
It is unsurprising that Bankman-Fried speaks in such an ambitious manner, as the entrepreneur has amassed a multi-billion fortune within just three years of entering crypto.
FTX has also taken an ambitious approach since entering the market in 2019, and over the past year the firm has been on an investment and purchasing spree.
FTX acquired Blockfolio for $150 million back in August 2020, and in March 2021 the exchange secured 19-year naming rights to Miami Heat’s home stadium worth $135 million.
Cointelegraph also reported last month that the exchange sealed naming rights worth $210 million for the global esports brand “Team SoloMid,” with the team changing their name to “TSM FTX.” On June 24 the platform also announced that it has partnered with the MLB to be the pro-baseball league’s official crypto sponsor.
According to data from Messari, FTX ranks 11th in 24 hour spot volume, and processed $206 million in spot volume over the past 24 hours. In comparison Coinbase’s 24 hour reported volume accounted for $1.6 billion.
Despite the regulatory scrutiny aimed at Binance, the exchange still towers over its competitors, with 24-hour spot volume totaling $10.6 billion.
Binance To End Support For Stock Tokens
The crypto exchange said that stock tokens are unavailable for purchase on its website effective immediately.
Crypto exchange Binance said it will no longer support tokens linked to stocks barely three months after it made them available on its trading platform.
Binance announced Friday that stock tokens are unavailable for purchase on its website effective immediately and support for such tokens will end on Oct. 14, with all positions closed the following day.
The embattled exchange said the move will allow it to focus on other products.
Binance introduced its stock token service in April, enabling customers to buy fractions of shares in companies, starting with Tesla and followed quickly by Coinbase. MicroStrategy, Microsoft and Apple were added shortly thereafter.
It did not take long for regulators to raise their eyebrows, with the financial watchdogs of the U.K. and Germany expressing concern in the following weeks.
The backlash against Binance has come to a head in recent weeks, with regulatory bodies around the world issuing warnings that the crypto exchange is not licensed to offer regulated services in their markets, including the U.K. and Japan.
The most recent warning came from Hong Kong, whose markets regulator announced today that Binance is not registered to operate in its jurisdiction.
CEO Changpeng “CZ” Zhao addressed Binance’s woes in an open letter July 7, calling compliance a “journey” and spoke of the need for “clearer regulatory frameworks” in response to the wider adoption of crypto.
Binance users in the European Economic Area and Switzerland who have bought stock tokens can migrate them to a new platform being built by CM-Equity AG, the German investment firm Binance worked with in the stock token venture.
The new platform is expected to open several weeks before the October deadline.
FTX Wallet Adds Support For BUSD And BNB Tokens On The Binance Smart Chain
FTX wallets now actively support withdrawals for BUSD and BNB, both native to the Binance Chain, and will soon enable users to make deposits via BSC BEP-20 tokens.
In what seems like an ongoing streak toward market penetration, prominent crypto exchange FTX has launched support for Binance Smart Chain BEP-20 tokens within its wallet services. While no official announcement was made, FTX CEO Sam Bankman-Fried confirmed the development by saying:
“Ftx.com/wallet now supports BSC for BUSD and BNB! (Withdrawals are live — I *think* deposits are; otherwise they will be very soon.)”
Based on the information available, FTX wallets now actively support withdrawals for Binance USD (BUSD) and Binance Coin (BNB), both native to the Binance Chain. The company will soon enable users to make deposits via BSC BEP-20 tokens.
However, the services are not yet available for the United States-focused FTX platform, FTX US and other prohibited jurisdictions. In a previous interview, Bankman-Fried opined that governments would require three to five years to provide regulatory clarity for crypto businesses wishing to operate within their jurisdictions. The entrepreneur also reportedly spends “five hours a day on everything from regulation to licensing.”
Recently, the company has also limited its users to leverage trades up to 20x instead of offering up to 101x. The intention behind this move was to minimize the inherent volatility risks associated with crypto trading. Surprisingly, the exchange has not witnessed a reduction in trading volumes following the announcement.
Complimenting the crypto exchange’s technological developments, FTX’s latest Series B investment round saw over 60 participants. The deal placed FTX’s valuation to a whopping $18 billion, a 1,400% increase from previously $1.2 billion.
Other market leaders such as Binance also follow similar methods to promote low-risk trading and increase market adoption. Crediting this move to the “interest of Consumer Protection,” Binance CEO Changpeng Zhao stated that limiting new users to 20x leverage on futures trades was something “he didn’t want to make a thingy.”
KYC Tools Can Minimize Hassle For US Crypto Market, FTX CEO Says
FTX will now use phone numbers to confirm users’ jurisdiction and names in addition to testing new KYC tools.
Ongoing regulatory scrutiny has forced many crypto businesses across the globe to close up shop.
Amid this crackdown, Sam Bankman-Fried, CEO of prominent crypto exchange FTX, has been vocal about his continued efforts to adapt to the changing regulations around running crypto businesses, announcing FTX’s efforts toward finding systems for streamlining its Know Your Customer (KYC) operations.
“As we mature as a company, we’ve been building out our checks, finding and incorporating more signals,” Bankman-Fried stated. He also highlighted the addition of a new feature on FTX that confirms a user’s jurisdiction based on their registered phone number. Bankman-Fried said:
“We check users’ phone numbers against their submitted names in KYC1, in order to further verify them. When this doesn’t work or there isn’t data, we’ll require KYC2 to access some features of the site, including futures.”
Sharing insights within FTX’s United States operations, the entrepreneur stressed the company’s continued efforts in “searching for more tools to confirm identity, hopefully while minimizing the hassle for users.” Bankman-Fried hopes this effort will help the company experience “smoother” operations within U.S. jurisdictions.
Currently, FTX aims to outperform rival crypto exchanges such as Binance and Coinbase. As reported by Cointelegraph, the CEO has previously said that acquiring Goldman Sachs and the Chicago Mercantile Exchange “is not out of the question at all” if it can surpass all crypto businesses to become the biggest exchange.
Complementing the announcement concerning the KYC-related update, Bankman-Fried cited investors’ funds and safety as a priority. He also assured investors there would be no restrictions on withdrawals unless the exchange can link the user’s activities to money laundering and theft-related activities. In doing so, the crypto exchange will continue to implement two-factor authentication and similar methods to help prevent theft.
Bankman-Fried recently discussed the immediate need for clarity in crypto regulation, supporting FTX’s drive to apply for licenses across numerous jurisdictions. In doing so, the FTX CEO claimed to spend “five hours a day” on regulation- and licensing-related activities.
The CEO said that he expects governments to have a clearer stance on crypto regulations in the next three to five years and intends to comply with KYC and Anti-Money Laundering requirements unique to each jurisdiction they serve.
‘Shark Tank’s’ Kevin O’leary Becomes FTX Spokesperson, Will Be Paid In Crypto
Mr. Wonderful has signed a multi-year deal to serve as a brand ambassador and spokesperson for FTX and will be paid in crypto assets and take an equity stake in FTX.
Shark Tank host Kevin O’Leary has become an official spokesperson for Sam Bankman-Fried’s FTX crypto exchange and will be paid in crypto and receive equity as part of the deal.
According to a Tuesday announcement, the partnership with FTX Trading Ltd. and West Realm Shires Services Inc. (owners of FTX.US and FTX.com) will see O’Leary take an equity stake in both firms.
The venture capitalist, also known colloquially as “Mr. Wonderful,” signed the multi-year deal to serve as a brand ambassador and spokesperson. He asked to be paid in crypto assets to increase his holdings.
In the announcement, O’Leary noted that “institutional investors struggle with the decision to invest in crypto assets,” as they harbor compliance-related concerns as he did regarding crypto:
“I am no different. I want to increase my crypto exposure but also serve my compliance mandates. When it comes to rapidly changing compliance and tax reporting requirements, the current cryptocurrency ecosystem is fraught with risks that I can not take.”
He also added, “To find crypto investment opportunities that met my own rigorous standards of compliance, I entered into this relationship with FTX.”
Regulatory compliance in crypto has been a long-standing issue for the investor, and he previously stated back in 2019 that:
“I have no interest in doing any of this crypto crap because it is not compliant.”
O’Leary has been tasked with elevating the brand to large audiences and has already got to work on social media by promoting an FTX CryptoPunk nonfungible token giveaway on Twitter. However, he unfortunately misspelled a word in the caption of his post, which reads “what to win a CryptoPunk? Here’s your chance!”
The venture capitalist has a knack for coming up with colorful nicknames for crypto, and in January, he referred to Bitcoin (BTC) as a “giant nothing-burger” due to its inconsistent regulatory frameworks across the globe. He has also described BTC mined in non-environmentally friendly ways as “Blood Coin.”
He has changed his tune on Bitcoin and revealed plans to allocate 3% of his investment portfolio to BTC in March. This week, he called Ethereum “ultrasound money” in a Cameo video.
FTX Crypto Exchange Buys Cal Memorial Stadium Naming Rights
The Cal Golden Bears will play their home games on newly rebranded FTX Field this football season, after the California university signed a 10-year, $17.5 million naming rights deal with cryptocurrency exchange FTX.US.
It’s the latest sports tie-up and the second naming-rights deal for FTX, which was valued at $18 billion in its most recent round of fund-raising. The NBA’s Miami Heat play in FTX Arena; the company is also the official crypto exchange of Major League Baseball. Football star Tom Brady took an equity stake in the company earlier this year as part of a long-term partnership.
FTX Chief Operating Officer Sina Nader was a walk-on member of the Golden Bears when he was an undergraduate; founder and Chief Executive Officer Sam Bankman-Fried’s father is also an alum. The deal is a new revenue stream for the university, which has been heavily subsidizing its athletics department for years.
On behalf of the university, Learfield, the multimedia rightsholder of Cal Athletics, will accept payment in cryptocurrency.
Considered one of the top stadiums in the U.S., Cal Memorial is on the National Register of Historic Places. It’s located in Alameda County, the namesake of Bankman-Fried’s trading firm, Alameda Research.
FTX.US acquires LedgerX for an undisclosed amount to dive into Bitcoin and Ether futures trading.
FTX.US, the United States-based affiliate of Sam Bankman-Fried’s cryptocurrency exchange FTX, is acquiring crypto derivatives platform LedgerX for an undisclosed amount.
FTX.US’ owner, West Realm Shire Services, announced on Tuesday that the company had executed a sale-and-purchase agreement to acquire LedgerX’s parent company, Ledger Holdings. The deal is expected to close, pending satisfaction of customary closing conditions, the firm noted.
LedgerX is a digital currency futures and options exchange regulated under the Commodity Futures Trading Commission, Swap Execution Facility and Derivatives Clearing Organization. The platform is available for retail and institutional investors, allowing them to trade cryptocurrency futures with the physical settlement of all contracts.
According to the announcement, the acquisition will have no material impact on LedgerX’s operations as the platform will continue to provide its current services to its existing customer base. The deal will reportedly provide FTX.US with the ability to offer options and futures contracts on Bitcoin (BTC) and Ether (ETH) to institutional and retail investors, significantly expanding its spot trading services.
“We believe the integration of our technological capabilities, product portfolio and large balance sheet with LedgerX will enhance our ability to provide innovative products to all US cryptocurrency traders,” FTX.US president Brett Harrison said. He also noted that it’s crucial for the industry to strive for relationships with regulators such as the CFTC.
The news comes after FTX.US’ affiliate global crypto exchange, FTX, posted the largest private fundraiser in crypto history, raising $900 million in July. The company’s CEO, Sam Bankman-Fried, said in a Monday Forbes interview that the crypto derivatives market is a “somewhat misunderstood area” so far, but it has the potential to significantly expand crypto markets wider by adding liquidity and making them more efficient in general.
SBF Promotes The Efficiency Of ‘Misunderstood’ Crypto Derivatives
FTX CEO Sam Bankman-Fried says derivatives are necessary to bolster the liquidity and efficiency of markets.
Sam Bankman-Fried, CEO of crypto derivatives exchange FTX, has argued that derivatives are vital for the efficiency of the digital asset markets.
In an interview with Forbes published on Monday, the crypto billionaire claimed that crypto derivatives are “misunderstood,” asserting that critics fail to recognize the vital role derivatives play in bolstering the liquidity and efficiency of markets.
Derivatives refer to financial contracts that derive their value from an underlying asset or benchmark. Crypto derivatives in the form of futures, options and perpetual swaps have attracted significant popularity in recent years.
Bankman-Fried Described Derivatives As “Misunderstood,” Adding:
“People will note that derivatives trade more volume in crypto than spot, which is true. But that is true of every asset class in the world.”
In addition to promoting the efficiency and liquidity of derivatives, Bankman-Fried highlighted that said products can offer greater flexibility to investors seeking exposure to crypto assets by allowing them to access the markets without taking on the challenges associated with custodying digital assets.
However, he acknowledged the risks associated with traders using excessive leverage, which can drive increased volatility and expose investors to liquidations. In March, Cointelegraph reported that extreme leverage had resulted in $500 million worth of Bitcoin being liquidated over the course of just one hour.
In late July, Bankman-Fried lowered the leverage available to traders on his FTX exchange from 101x down to 20x. At the time, he stated the move was intended to “encourage responsible trading.” Speaking to Forbes, Bankman-Fried further elaborated on his decision to reduce the leverage available to FTX users:
“Any position that you’re putting on with that level of leverage can’t be absolutely crucial for efficient markets, and this is not something I felt was particularly important or good for crypto market health.”
Bankman-Fried also encouraged the wider crypto industry to embrace regulation, urging digital asset firms to do “a more conscientious job of interfacing with regulators.”
Earlier this month, the FTX boss estimated that it will take three to five years before there is regulatory clarity for the crypto industry. “I’m spending five hours a day on everything from regulation to licensing and everything in between,” he said.
On Aug. 9, FTX announced that it was going to be streamlining its Know Your Customer procedures by checking phone numbers against data held on record to confirm users’ jurisdictions.
Blockchain-Fueled Stock Exchange BSTX Gets Greenlight From SEC
* Approval Doesn’t Apply To The Trading Of Digital Tokens * Technology Would Be Used For Services Such As Settlement
The BSTX exchange won approval from U.S. regulators for a plan to use blockchain technology to fuel key aspects stock trading.
The approval, announced on the SEC’s website late Thursday, is being hailed by some as a milestone in a push for regulated crypto markets. However, the SEC said in its filing that the go-ahead doesn’t apply to the trading of digital tokens — meaning that the exchange won’t be able to start offering cryptocurrencies and other virtual assets.
According To The SEC, BSTX’s Go-Ahead Is Limited To More Traditional Stock Exchange Services, Including:
* Clearance and settlement procedures that could be as short as the same day, versus the standard time of two business days * Market data that would be available on BSTX Market Data Blockchain
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