- EDX Markets originally revealed its “non-custodial” exchange launch plans in September, around two months before the demise of FTX.
- Days prior to the news, BlackRock submitted an application to start the first spot Bitcoin exchange-traded fund in the United States.
- Additionally, EDX disclosed the completion of a second investment round with new investors.
Just a few days after BlackRock filed an application to launch the first spot Bitcoin ETF in the U.S., a newcomer called EDX has arrived in the crypto exchange market.
Fully named EDX Markets, the crypto exchange is supported by some of the most powerful Wall Street firms, including Citadel Securities, Charles Schwab, and Fidelity Investments. On June 20, the business announced the opening of its digital asset market with the goal of luring “industry leaders” in with competitive quotes, liquidity, and a non-custodial model that lessens conflicts of interest.
Introducing EDX Clearing
Only four cryptocurrencies are supported by the exchange at this time: Bitcoin, Ether, Litecoin, and Bitcoin Cash. In contrast, it intends to introduce EDX Clearing, a clearinghouse that will employ a central counterparty to settle trades made on the EDX Markets platform.
Benefits from this include improved price competition, decreased settlement risks, and increased operational efficiencies. Strategic investors who joined the original group of founding investors, including Miami International Holdings, DV Crypto, GTS, GSR Markets LTD, and HRT Technology, provided EDX with additional investment.
Does Big Finance Directly Support Crypto?
The launch of EDX Markets coincides with the SEC’s increased scrutiny of the Bitcoin industry. However, it appears that traditional financial institutions are still interested in digital assets. For instance, on June 15, BlackRock, which oversees $20 trillion worth of assets, submitted an application for the first Bitcoin spot ETF in the US. In the event that it is approved, this ETF would give investors a secure and practical option to access Bitcoin.
The move, together with its backer, clearly demonstrates that long-term institutional interest in cryptocurrencies has not decreased despite the industry’s bad press from FTX and other bad actors in 2022 and the chill from U.S. regulators this year.
Following the revelation that BlackRock has applied for a position in a Bitcoin trading ETF, other financial firms began taking similar steps to ensure they would also have a piece of the action. One of such companies is exactly the same Fidelity, an EDX backer, who is reportedly considering applying for an ETF and/or buying a company that manages a sizable portfolio of digital assets.
How Is It Different This Time?
The “crypto asset securities” that the SEC was pursuing in recent legal actions against Binance and Coinbase were not present on the EDX platform. The goal of EDX is to meet the needs of major financial institutions seeking exposure to cryptocurrencies but holding concerns about centralized crypto service providers by portraying itself as a “non-custodial” exchange.
A non-custodial platform assures that customer funds are stored at third-party banks acting as a crypto custodian rather than holding the crypto-tokens that belong to its users, allaying worries about possible fund misuse.
For instance, unless a consumer chooses a self-custody Coinbase wallet, Coinbase functions as a custodian for their cryptocurrency.
While it is easy to begin trading cryptocurrency with an exchange that keeps your tokens, dangers include losing your assets in the event that the exchange is compromised or experiencing lesser returns owing to custodial fees.
The ETX crypto exchange will serve as a hub for a network of businesses to execute and settle trades using digital assets and fiat money. It does not, however, yet aid in the resolution of those trades.
Bonus: Wall Street Backers Citadel and Virtu are Newcomers
Wealth manager and CEO of digital advisor company Lumida, said both Citadel and Virtu business methods disintermediate conventional over-the-counter market-making desks in order to revolutionize how commerce is conducted.
He tweeted that Citadel launched a CLOB (Central Limit Order Book) for Treasuries in 2018, which was a huge development in the foreign exchange market.
Opacity is advantageous for traditional fixed-income trading desks (over-the-counter, not electronic, no best bid/best offer, no order book). The CLOB is founded on transparency.
Still, the impact of Citadel CLOB was uneven. Citadel’s action was disruptive because it aimed to establish a new trading paradigm in a space previously dominated by big banks. These banks could lose market share, therefore this was considered as a potential danger.
On Wall Street, there are groups with vested interests. Traditional Wall Street favors opacity and OTC trading. Competition on open, liquid marketplaces is preferred by Citadel, Virtu, MarketAxess, and others.
