Archax Nears Launch of UK Regulated Digital Asset Exchange
Archax, the first exchange, brokerage and custodian for digital securities regulated by the UK Financial Conduct Authority, is aiming to go live in the first quarter of next year and bring its pipeline of 50 issuances of tokenized assets to market over 2022.
Graham Rodford, chief executive and co-founder of Archax, told Markets Media that the firm was created in 2018 with a view to launching the most credible crypto exchange that centred largely around institutions and regulation. Prior to Archax, Graham was COO, CCO and Partner of Omni Partners, a $1.4bn hedge fund based in London.
Rodford said: “We are aiming to launch the regulated exchange, custody service and our primary issuance platform in the first quarter of next year.”
Users will be able to connect using their existing trading system and have the ability to run multiple accounts.
Archax applied to the FCA to become a regulated digital securities exchange broker and custodian in 2019 and received that permission last year.
In 2020 Archax also become the first UK cryptoasset company. Since January 2020 firms carrying out specific cryptoasset activities in the UK have had to register with the FCA and comply with money laundering, terrorist financing and transfer of funds regulations.
“We are trying to be the most credible institutional venue,” Rodford added. “There is nowhere else in the UK where you can trade traditional and digital securities as well as crypto and exchange-traded products in one place.”
Over the course of next year Archax would like to have market makers across a range of products, a broad range of institutions connected to the platform, and tight spreads and liquidity, as well as clients holding multiple asset types.
“Our priorities for next year will be building traction, continuing to develop the product and launching derivatives in the second half and to maybe have a hub in another jurisdiction,” said Rodford.
Archax is applying for regulatory permissions across Europe, in Hong Kong, Singapore, Australia and the US in order to be able to offer services as widely as possible.
In October Archax completed the first fundraising on its Primary Issuance Platform.
Rodford said: “Our market infrastructure subsidiary Montis Digital raised funds through a digital issue under the watchful eye of the FCA in its sandbox, together with DLA Piper. There is also an option to convert to tokens in the future.”
The oversubscribed round of $1.5m was conducted for Archax’s subsidiary which is building blockchain-based market infrastructure for the post-trade ecosystem.
We have completed the first raise on our Primary Issuance Platform in collaboration with @DLA_Piper as part of FCA Sandbox Cohort 6.
— Archax (@ArchaxEx) October 19, 2021
Participants in the raise were onboarded through the Archax website portal, with their holdings maintained and recorded in the Archax regulated custody service, to pave the way for future digital token issuance. The DLA Piper regulatory compliance platform was also used to automate and assess the regulatory requirements applicable to the raise and create the required legal documents for participating in a digital issuance.
Martin Bartlam, partner at DLA Piper, said in a statement: “This enables issuers to exchange equity and/or debt into digital format that can be traded on the Archax exchange with a minimum of management time and effort as well as to raise new funding in digital or traditional form.”
Rodford compared the primary platform to a crowdfunding platform for professionals that raises money for small and medium-sized enterprises through equities or debt.
“We have a wide range of companies that are looking to raise funds with us,” added Rodford. “The platform allows issuers to migrate from the primary to the secondary market and create liquidity.”
In addition, Archax has a pipeline of 50 issuances of regulated tokenized assets from different parts of the world and with a wide variety of underlying assets. The firm is also working on a tokenization project with a multi-billion dollar asset manager and a Tier One bank to create a tokenized real estate fund.
Rodford suspects that in five years most people in financial services will hold crypto directly through their firm or personally.
“You will start seeing everyone’s portfolio holding either cryptocurrencies, exchange-traded products or tokenized securities,” he said. “Central bank digital currencies will probably have been released and you will start to see corporate actions being done on a blockchain.”
In December Launchpool, the token-based community crowdfunding platform, announced a partnership with Archax.
We have partnered with @LaunchPoolXYZ, the token-based community crowdfunding platform.
This partnership will provide new services for the Launchpool community.https://t.co/Y32odsNs8E
— Archax (@ArchaxEx) December 7, 2021
Richard Simpson, chief executive at Launchpool, said in a statement: “This partnership will not only offer new options for Launchpool’s community, it will also open up new investment opportunities for Archax’s investor community by providing access to token based projects in a regulated way.”
Digital asset securities predictions
Texture Capital, an SEC-registered broker-dealer focusing on the issuance and trading of digital securities in private markets, has made some predictions for 2022 on its blog.
The firm said: “The below commentary is for entertainment purposes only and should not be considered investment advice.
The predictions include:
- a major US financial institution issuing a $100m+ digital security
- SEC announcing that it considers some NFTs to be securities
- tokenized real estate taking off in 2022, with over $1bn in real estate assets being recorded on blockchain
The next focal point of the crypto market will be over-the-counter derivatives.
The consortium aims to grow its membership of FDIC-insured banks.
Matt Zhang created the bank's spread products investment technologies team.
Coinbase Prime has been working to establish a market leading prime services offering.
The agencies plan to provide greater clarity throughout 2022 on certain crypto-related activities.