EDX exchange is Wall Street’s latest venture into crypto

Picks, spades and tokens

Despite a slowdown in crypto markets, several large institutional investors are seeking to invest in crypto. One factor holding them back, however, is the lack of the kind of infrastructure they are used to in established capital markets. That is changing, as the technology infrastructure for crypto begins to mature in areas ranging from security to data.

One area that is being developed is crypto trading. Trading as a service is emerging, with APIs and other products that developers and companies can use to set up crypto trading for their customers.

• The latest sign of this maturation is EDX Markets, a new digital asset exchange being developed by Wall Street players such as Citadel Securities, Virtu Financial, Fidelity Digital Assets and Charles Schwab, as well as venture capital firms Sequoia Capital and Paradigm.
• The digital exchange, led by former Citadel Securities CEO Jamil Nazarali, is roughly modeled and built on the trading technology of the Members Exchange, or MEMX, another exchange being developed by similar companies as an alternative to major exchanges such as the NYSE and Nasdaq. .
• EDXM’s custody and wallet technology is provided by crypto custody and infrastructure company Paxos, the companies announced Wednesday.

Big banks have a long list of reasons not to go deep into crypto. These include accounting, risk, security and regulatory concerns as well as a desire for more mature technology.

• Paxos, which already serves customers such as PayPal and Nubank, says EDXM could attract big banks. EDXM “brings traditional market structure and also traditional market participants to this liquidity offering through the exchange,” said Walter Hessert, Paxos’ chief strategy officer.
• EDXM also differs from some other crypto providers in being a market maker, exchange and manager all in one, which can be a conflict of interest and is not usually done in traditional markets, Hessert said.

Competition in the sector is intensifying. There is already a wide range of services for institutional customers to make use of.

• Coinbase offers crypto trading APIs, escrow, payment API and related services, seeking to attract both large and small customers. It recently announced a deal with BlackRock to offer crypto services.
• A number of other API providers such as Prime Trust, MoonPay, Wyre and Transak have emerged to offer quick and easy connections to crypto trading and other services. Custody providers such as Anchorage and Fireblocks also offer crypto trading. And others are jumping in: Stripe has announced products for merchants to pay out in crypto or convert fiat to crypto.

“The convergence we’re seeing in the industry is that people are moving up and down the value chain, because competition has increased,” said Sara Xi, chief product officer at Prime Trust. “So the more you cover in the value chain, the more sources of income you have.”

Consolidation seems inevitable: Although Bolt’s deal for Wyre fell apart, DriveWealth bought a smaller firm, Crypto-Systems. More deals may come soon in this sector, as many providers offer overlapping services, analysts say.

– Tomio Geron (e-mail | twitter)

A version of this story first appeared on Protocol.com. Read it here.

A MESSAGE FROM ALIBABA

Alibaba—a leading global e-commerce company—is a particularly powerful engine for helping American businesses of all sizes sell goods to more than 1 billion consumers on its digital marketplaces in China. In 2020, US companies completed more than $54 billion in sales to consumers in China through Alibaba’s online platforms.

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On the money

Crypto legislation has stalled. Efforts to overhaul federal digital asset regulations have “all but evaporated” ahead of the midterm elections.

A fund linked to bankrupt Three Arrows Capital moved hundreds of NFTs to its liquidator. More than 300 NFTs were moved out of a crypto address linked to Starry Night Capital, the NFT-focused fund launched by the co-founders of the now-bankrupt Three Arrows, Bloomberg reported. Teneo, the hedge fund’s liquidator, confirmed the move was part of its bid to take control of Three Arrows’ assets.

Mastercard has launched a new crypto tool for banks. Called Crypto Secure, the system uses AI to determine the risk of crime associated with crypto exchanges on Mastercard’s payment network. The service is powered by CipherTrace, which Mastercard bought last year.

The CFTC served the Ooki DAO through a bot helper and a forum post – and the courts are cool with it. A federal judge in California found that the Commodity Futures Trading Commission acted properly in filing its charges against the decentralized autonomous organization through an online forum.

Coming soon to a (home) theater near you: Coinbase. CEO Brian Armstrong shared a trailer on Twitter for “COIN,” a documentary that will be released Friday about the history of the exchange and crypto.

Consumer Financial Protection Bureau fined Choice Money. The CFPB orders the transfer company to pay a $950,000 penalty for not accurately disclosing money transfer fees, among other alleged problems.

Overheard

Is Coin base easing pressure for a single digital asset regulator? “We very much support two measures, one in the House, one in the Senate, that would give the CFTC spot authority,” Kara Calvertthe crypto exchange’s head of US policy told Decrypt.

SushiSwap is considering overhauling its legal structure to give DAO members more protection. “Simply calling an unregistered group of individuals who vote on governance for a DAO is not going to fly, and that is what the latest lawsuits are aimed at.” the group’s newly elected “head chef” Jared Gray wrote on the organization’s Discord.

Just one more question…

Tim Barnett, Chief Information Officer, Bluefin

Barnett worked as an engineer for the National Security Agency for a decade before starting his career in the technology industry focusing on payment software and fintech. He joined Bluefin in 2011.

What was your biggest professional mistake?

Early in my career, when I was CIO at Nova (now Elavon), we created some really great technical payment products to connect companies to Nova over the internet in a secure way for transaction processing. This will eliminate telephone charges for dialing or the need for a dedicated circuit. The problem was that they were too complicated for the sales team to understand, so they couldn’t sell it because they didn’t know how. My lesson here is that no matter how great you think something is, if you can’t sell it, it has no value. Don’t spend the resources and expense to build a solution if you don’t have an effective strategy to sell it. It is important to make sure that you have a marketable offer that is not too complicated.

A MESSAGE FROM ALIBABA

Using economic multipliers published by the US Bureau of Economic Analysis, the NDP estimates that the ripple effect of this Alibaba-driven spending in 2020 supported more than 256,000 American jobs and $21 billion in wages. These US sales to Chinese consumers also added $39 billion to US GDP.

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