At the heart of early cryptocurrency was the ideal that cross-border transactions could exist outside the system, untraceable and pseudonymous. That’s about to change.
The Financial Action Task Force (FATF) is one of the most powerful standards-setting bodies on the planet, and as reported by Bloomberg, is due to recommend the most important regulatory change ever to hit the cryptocurrency industry.
There’s a new sheriff in town for crypto.
The FATF wants regulators to instil recognisable user data at the heart of all new rules on cryptocurrency trading and transactions.
The imposition of this so-called ‘travel rule’ represents a trying time for the industry. Blockchains are not, on the whole, designed to register this kind of on-chain identifying information.
Some would argue that forcing old-tech rules onto crypto will decrease transparency, not improve it.
But whether the rule comes to fruition or not in its current form is a moot point. The outcome is the same: major players will be forced into closer collaboration with regulators and with one another. And as we know, fully-regulated businesses can attract better, more secure funding from more sophisticated investors. Kay Why See
From Malaysia to San Marino, Switzerland to Wyoming, forward-thinking states and nations are writing laws to pull digital asset exchanges into their day-to-day oversight.
Reputable and regulated exchanges – just as in the mainstream equity world – require investors to identify themselves if they want to buy crypto-assets.
This is because modern money transfer laws all require some level of Know Your Customer (KYC) process to identify where money has come from, and where is it going.
Even Shapeshift, once the darling of the anonymity crowd, has had to fall in line. CEO, Erik Vorhees, announcing the layoff of a third of its workforce, admitted that failing to prepare to share user data for KYC had devastated the company financially.
Those that can prove they will work with the system, not against it, will be allowed to reap the rewards.
As proof, the world’s largest digital asset exchanges will sit down with global policymakers in Japan later this month for a crucial meeting to determine how the FATF proposal will affect the industry.
The meeting, which coincides with the G20 summit in Osaka, will count exchanges like Coinbase, Kraken, Huobi and the Goldman Sachs-backed, Circle among its numbers.
As digital asset professionals we need to be in close contact with regulators, putting forward our case and making sure the benefits of what we bring to the table are heard. Facebook creates crypto buzz
Facebook’s Libra cryptocurrency has ignited mainstream interest in the space once again.
Technical details of the project have now been shared in a 29-page whitepaper, borrowing from Bitcoin and Ethereum to power a new global currency.
And regulation was there from the beginning.
Libra, Bitcoin and Ethereum putting crypto on the map.
It’s no accident that Mark Zuckerberg went to the Commodity Futures Trading Commission (CFTC) to talk about how his in-house crypto would work, long before it ever came to market.
The cynicism and suspicion that once characterised regulatory approaches to crypto assets is on the way out, too.
In fact, the CFTC, which oversees the US derivatives and futures market, has grown much fonder of blockchain.
Officials even suggested in a June 2019 speech to the Italian securities regulator, CONSOB, that blockchain-based records could have helped to prevent the 2008 financial crisis.
Outgoing chairman J. Christopher Giancarlo said: “Imagine if regulators could have viewed a real-time distributed ledger […]to recognise anomalies in market-wide trade activity and diverging counterparty exposures indicating heightened risk of bank failure?”
He added: “What a difference it would have made a decade ago if blockchain technology on a private distributed ledger accessible to regulators had been the informational foundation of Wall Street’s derivatives exposures. At a minimum, it would certainly have allowed for far faster, better-informed, and more calibrated regulatory intervention instead of the disorganised response that unfortunately ensued.”
Fintech firms should not be afraid of regulators. Quite the opposite: close collaboration is key. The right conversations at the right time can transform your prospects and bring funding to the table. Inside, not outside
At one time cryptocurrency was content to exist outside the financial mainstream. Its anonymity made it a pariah, its volatility a joke, a bogeyman to scare financial advisers and bring them out in a sweat late at night.
But this scrappy outsider is changing its ways. The market is maturing. It was unthinkable 10 years ago that Bitcoin could become a stalwart of the financial system. But here we are.
What was once underground is now mainstream.
Perhaps related is the fact that the US Security and Exchange Commission’s Office of Compliance Inspections and Examinations has ramped up investigations by 10% year-on year and marked out digital asset broker-dealers, exchanges and traders for special attention in its 2019 priorities list.
Where once large investors saw only risk in digital assets, they now see opportunity. These are pension funds and hedge funds, those whose job it is to allocate assets for millionaires and billionaires, and who control the future purchasing power of entire populations.
Dow’s Marketwatch explains how institutional investors are now bullish on crypto, backed by record highs in the Bitcoin futures market.
When the owner of the New York Stock Exchange launched digital asset exchange Bakkt in 2018, the veil was lifted and the idea that cryptocurrency would be relegated to a mere sideshow ended. Bakkt will begin testing its Bitcoin futures and custody in July 2019.
Interdealer broker, ICAP, is entering Bitcoin derivatives, too. This $568 million-a-year revenue business looks after trades for investment banks and large asset managers.
Speaking to Bloomberg, the joint head of digital asset markets Duncan Trenholme admitted: “Every institution is on an educational journey. Many are exploring how tokens can legitimately be traded or stored and I’d expect more projects to hit the market over the next year or two.”
Note that key word. Legitimately. Within the rules.
The question we face is not whether regulation is necessary for digital assets, but how digital asset businesses can best work with regulators. Looking forward
Securing the correct licence can transform the value of fintech assets. Working within the system and fulfilling compliance obligations is costly, sure. In fact, regulatory costs for financial institutions could double in the next decade.
But financial regulators can open massive markets for the best fintech products. Some economies, like South Korea, have recognised the industry’s huge potential but aspects of regulation like cryptocurrency taxation still exist in a legal grey area.
Others, like India, are moving to follow a shadow banking ban for cryptocurrency firms with an incredible 10-year jail sentence for trading in digital assets. Large Indian crypto-exchanges like Zebpay and Coinome, have been forced to shut their doors in such a harsh and uncertain regulatory environment.
At the same time, one of India’s largest and most powerful tech lobbies is trying to make the case to the central bank for legalisation and regulation. These conversations are vital.
One example we should all watch closely is that of Switzerland’s SIX exchange. It became the first in the world to debut an exchange traded product for cryptocurrency. Now, the Amun Crypto Basket, tracking the prices of Bitcoin and Ethereum, sits happily alongside exchange-traded products (ETPs) for gold, oil, silver and other traditional commodities.
Amun had a keen eye for regulatory standards and is reaping the rewards. It should come as no surprise that the most recent ETPs listed on SIX are all by Amun. Single-asset funds for Ripple and Ethereum arrived in 2019, for example. By contrast the last new traditional commodity ETPs debuted way back in 2013.
This is fintech working at its best, disrupting the market with the regulator’s backing, attracting institutions and setting the new standard for investment. By Maxim Bederov * More Details Here
What is XTRD?
XTRD is a technology company that are introducing a new infrastructure that would allow banks, hedge funds, and large institutional traders to easily access cryptocurrency markets.
XTRD is launching three separate products in sequential stages to solve the ongoing problems caused by having so many disparate markets. Firstly a unified FIX API followed by XTRD Dark Pools and finally the XTRD Single Point of Access or SPA.
Our goal is to build trading infrastructure in the cyptospace and become one of the first full service shops in the cryptocurrency markets for large traders and funds.
- A single FIX API for trading across all connected exchanges
- A robust GUI for manual cross execution on all crypto markets
- A large liquidity pool, based on orders books from all connected exchanges
- Best prices and best top of book execution net of fees
- Low transaction fees
- 99.99999% reliability and uptime
- Fast execution
- Parent/child orders on multiple exchanges to minimize individual market impact
- Advanced order types common in the equity and FX trading space
- Establish XTRD as a premier market-making entity to mitigate spreads and increase liquidity in the cryptocurrency space
- Derivative trading - XTRD plans to connect to LedgerX (US based, approved by the CFTC) for cryptocurrency options and swaps to offer unified hedging and derivate trading strategies
- Robust, US based technical support
- Reliable and familiar deployment methods for institutions:
- IPSec as a connectivity option across the Internet
- Cross connection options
- Collocation space or VPS (Virtual Private Servers) that clients can rent from XTRD
- UAT/Sandbox environment for testing
What are the industry issues?
COMPLEX WEB OF EXCHANGES. A combination of differing KYC policies, means of funding, interfaces and APIs results in a fragmented patchwork of liquidity for cryptocurrencies. Trading in an automated fashion with full awareness of best pricing and current liquidity necessitates the opening and use of accounts on multiple exchanges, coding to multiple API’s, following varying funding and withdrawal procedures. Once those hurdles are cleared, market participants must convert fiat currency to BTC or ETH and then forward the ETH on to an exchange that may not accept fiat, necessitating yet another transaction to convert back to fiat. Major concerns for market participants range from unmitigated slippage and counterparty risk to hacking prevention and liquidity.
HIGH FEES. Execution costs are even more of a factor. Typical exchange commissions are in the 0.1% – 0.25% range per transaction (10 to 25 basis points), but the effective fees are much higher when taking into bid and ask spreads maintained by the exchanges. As most exchanges are unregulated, there is generally no central authority or regulator to examine internal exchange orders that separate proprietary activity from customer activity and ensure fair pricing.
THIN LIQUIDITY. A large institutional order, representing a sizable percentage of daily volume can move the market for a product, and related products in an exchange by a factor of 5-10%. That means a single order to buy $1,000,000 worth of bitcoin can cost an extra $50,000-$100,000 per transaction given a lack of liquidity if not managed correctly and executed on only one exchange. By way of comparison, similar trades on FX exchanges barely move markets a fraction of a percent; those price changes cost traders money, and deter investment.
What are the XTRD solutions? FIX API
An API is an “Application Programming Interface”, a set of rules that computer programs use to communicate. FIX stands for “Financial Information eXchange”, the API standard used by most financial organizations as the intermediary protocol to communicate amongst disparate systems such as market data, execution, trade reporting, and order entry for the past 25 years.XTRD is fixing the problem of having 100 different APIs for 100 exchanges by creating a single FIX based API for market data and execution – the same FIX API that all current financial institutions utilize.XTRD will leverage our data center presences in DC3 Chicago and NY4 New Jersey to host FIX trading clients and reduce their trading latencies to single milliseconds, a time acceleration of 100x when it comes to execution vs internet. More infrastructure and private worldwide internet lines will be added in 2018 and beyond to enable secure, low latency execution for all XTRD clients, FIX and PRO. XTRD PRO
XTRD PRO is a professional trading platform that will fix the basic problems with trading across crypto exchanges – the need to open multiple web pages, having to click around multiple windows, only being able to use basic order types, and not seeing all your positions, trades, and market data in one place.XTRD PRO will be standalone, downloadable, robust end-to-end encrypted software that will consolidate all market data from exchanges visually into one order book, provide a consolidated position and order view across all your exchange accounts, and enable client side orders not available on exchanges – keyboard macro shortcuts, VWAP/TWAP, shaving the bid and offer, hit through 1% of the inside, reserve orders that bid 100 but show 1, SMART order routing to best exchange and intelligent order splicing across exchanges based on execution costs net of fees, OCO and OTO, many others. XTRD SPA
XTRD SPA is the solution to bridge cross-exchange liquidity issues. XTRD is creating Joint Venture partnerships with trusted cryptocurrency exchanges to provide clients on those exchanges execution across other exchanges where they do not have accounts by leveraging XTRD’s liquidity pools.An order placed by a client at CEX.IO, XTRD’s first JV partner, can be executed by XTRD at a different exchange where there may be a better price or higher liquidity for a digital asset. Subsequently, XTRD will deliver the position to CEX.IO and then CEX.IO will deliver the execution to the client, with XTRD acting as just another market participant at the CEX.IO exchange.XTRD does not take custody of funds, we are a technology partner with exchanges. All local exchange rules, procedures, and AML/KYC policies apply. XTRD DARK
Institutions and large market participants who have large orders of 100 BTC or more generally must execute across multiple markets, increasing their counterparty risk, paying enormous commissions and spreads, and generally having to deal with the vagaries of the crypto space. Alternatives are OTC brokers that charge multiple percents or private peer-to-peer swaps which are difficult to effectuate unless one is deeply in the space.XTRD is launching XTRD DARK – a dark liquidity pool to trade crypto vs fiat that matches buyers and sellers of large orders, discreetly and anonymously, at a much lower cost. Liquidity is not displayed so large orders do not move thin markets as they would publicly. The liquidity will come from direct XTRD DARK participants as well as aggregation of retail order flow into block orders, XTRD’s own liquidity pools, connections with decentralized exchanges to effectuate liquidity swaps, and OTC broker order flow.XTRD is partnering with a fiat banking providebroker dealer to onboard all XTRD DARK participants for the fiat currency custody side with full KYC/AML procedures.
- TOKEN USAGE. XTRD will generate the XTRD utility tokens via smart contact during the Token Generation Event (TGE) in Q1 of 2018. The XTRD utility token will be utilized on the XTRD network by market participants to pay for execution, VPS, market data, software licensing, and other fees. Market participants will be able to purchase XTRD tokens directly from XTRD’s liquidity pool. The TGE will be preceded by a private institutional sale and a SAFT (Simple Agreement for Future Token) Platform based presale. The XTRD token will be fully ERC20 compliant to ensure that it functions properly on the Ethereum blockchain, similarly to other ERC20 tokens.
- XTRD TOKEN LIQUIDITY AGGREGATION. The XTRD token will be used to create liquidity in the overall cryptocurrency market. Along with the utility of the XTRD token to pay for fees on the XTRD platform of products, most of the XTRD token revenue will be used to increase the inventory of other cryptocurrencies that are in demand by our customers. This will create points of liquidity for our customers to access across the worldwide crypto exchange ecosystem. These liquidity points will be created using XTRD tokens that are paid back into the system for fees. 70% of funds raised in the token sale will be used for liquidity aggregation.
- XTRD STAKING. Discounts of 25% on XTRD services (execution, colocation, market data, software licensing) will be available for token holders in general and discounts of 40% on XTRD services will be available for token holders who maintain an average monthly stake of at least 50,000 XTRD tokens. Fiat will be accepted at no discount to par. Execution fees will generally be set as a percentage of the gross trade amount, based on a combination of factors such as liquidity, the pair being traded, market conditions at the time of the trade, and so on. All charges will be marked to market and remain constant, no matter the value of the XTRD token (a $10 charge will be 2 XTRD if $5 each or 0.5 XTRD if $20 each).
- TOKEN LEGAL CONSIDERATIONS. XTRD tokens are ERC20 compliant utility tokens functioning on the Ethereum blockchain. The value of XTRD is derived purely from serving as a medium of payment for services by market participants in the XTRD trading ecosystem. XTRD tokens confer no voting rights, profit participation, equity, ownership of intellectual property, revenue sharing, rights to dividends, transfer of ownership upon company sale, control of company assets, or any decision-making ability regarding XTRD or its’ operations. XTRD tokens are not designed for speculation. In summary, XTRD tokens are not securities. XTRD Digital Assets, Inc has obtained a qualified legal opinion concurring that XTRD tokens are not to be considered “securities” under applicable U.S. securities laws given their failure to meet all prongs of the Howey Test.
Who is XTRD intended for?
XTRD is mainly aimed at major institutions, hedge funds, algorithmic traders who are currently unable to enter the crypto markets.
These firms include companies such as Divisa Capital run by XTRD Advisor Mushegh Tovmasyan.
XTRD Weekly Updates
Further AMA's will be coming soon!
XTRD In The Media
More information will be added to this thread as the project develops.
We are currently looking for key community members to assist in building out this thread.
If you are interested please email [[email protected]
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