Group Co.
Crypto Derivatives Exchange Awaits Regulatory License
Traders Magazine Online News, October 16, 2018
Quedex Limited, a cryptocurrency derivatives exchange, is expected to shortly receive regulatory approval in Gibraltar which should encourage trading from institutional investors.
Wiktor Gromniak, director and chief executive of Quedex Limited, told Markets Media that the company is based in Gibraltar as the jurisdiction has been forward thinking about the regulation of cryptocurrency and digital assets.
Quedex is a crypto-centric derivatives exchange listing futures and European vanilla options. The firm secured $888k of seed financing in 2016 and a test version of the exchange was launched in December last year. Gromniak said smaller firms have been trading.
“Large institutional investors are interested in using the exchange and waiting for our regulatory approval,” he added. “We are in the final stages of our license application and the process should be complete in the coming weeks.”
The US exchanges, Cboe Global Markets and CME Group, started trading Bitcoin futures in December last year. Rival US exchange, ICE, is also due to launch physically settled bitcoin futures next month.
Gromniak said he did not see these larger exchanges as direct competitors.
He said: “We are a crypto-centric exchange with bitcoin as our home currency for cash settlement, and the US dollar underlying our derivatives, so they can be used for hedging. CME and Cboe contracts offer the opposite and so are used for speculation.
Quendex derivatives are margined and settled in bitcoin and only bitcoin is deposited and withdrawn, with clearing and settlement in-house. Gromniak continued that Quedex also trades 24 hours a day, seven days a week.
Custody
One of the main hurdles holding back the institutional trading of cryptocurrencies is the lack of trusted custody solutions according to GreySpark Partners. The consultancy said in a report last month: “The market is waiting for big houses such as State Street and Northern Trust to take on this role. Difficulties in accessing liquidity or finding capital-efficient instruments for short or hedge positions is also an issue.”
Gromniak said Quedex will also be regulated as a custodian of crypto assets.
“Security is a priority and we have a proprietary solution,” he added. “We achieve ultimate security by using multi-signature cold storage for cryptocurrencies and end-to-end encryption for communication with the exchange engine.”
Axel Pierron, co-founder and managing director at consultancy Opimas, said in a recent report that custody is often used in the sense of safekeeping for digital assets , without including the additional services that traditional bank custodians provide to clients.
Pierron said: “Given the sensitivity and importance of the crypto wallet private key and the numerous reported hacks and thefts of coins, this aspect of the value chain is of great strategic importance to the development of this industry.”
He continued there are two main methods of safekeeping. Hot storage is online, which is convenient but vulnerable to theft and hacks, as the private key and wallet are connected to the network. Cold storage is offline, and so is safer and more secure, but takes more time to access funds.
“As is often the case in the digital asset world, participants end up with a trade-off between speed and security,” said Pierron.
For more information on related topics, visit the following channels:
Comments (0)