New crypto exchange backed by Citadel Securities, Fidelity goes live

Written by Yueqi Yang and Catherine Doherty

A new cryptocurrency exchange backed by companies such as Citadel Securities, Fidelity Digital Assets, and Charles Schwab Corp. It came into effect, a move that could reshape the digital asset landscape amid increasing US scrutiny of the sector.

EDX Markets, an institutional-only exchange announced in September 2022, will offer trading in four cryptocurrencies: Bitcoin, Ethereum, Litecoin, and Bitcoin Cash. Unlike existing crypto platforms such as Coinbase Global Inc. and Binance Holdings Ltd. However, it offers a “non-security” model, which means that it does not hold customers’ digital assets while trading. Instead, EDX is working with a third-party custodian, according to CEO Jamil Nazarali.

Nazarali said that the regulators’ expectation that cryptocurrency exchanges should separate broker-dealer functions, similar to the structure of traditional financial markets, will create opportunities for EDX.

“We believe cryptocurrency is here to stay, but for it to evolve as an asset class it needs to adopt the rules and investor protections found in traditional finance,” Nazarali said in an interview. “The message we’ve been getting from our investors is that this creates more space for us.”

Already backed by companies like Paradigm, Sequoia Capital, and Virtu Financial Inc. EDX has raised new funding through additional investors including Miami International Holdings, GTS, GSR Markets and HRT Technology. It plans to launch EDX Clearing to settle deals later this year.

The US Securities and Exchange Commission recently widened its crackdown on the cryptocurrency industry with lawsuits against two of the largest firms, Binance and Coinbase, alleging they acted as unregistered securities exchanges, brokers, dealers and clearinghouses. The companies denied the allegations.

SEC Chairman Gary Gensler has long criticized incumbent crypto platforms for failing to separate different parts of their businesses, such as custody, market making, and trading, which could create conflicts of interest.

Institutional interest in investing in cryptocurrencies waned after the industry went through a market crash and the collapse of high-profile companies including FTX last year. Some traditional financial institutions are still laying the groundwork for participating in the cryptocurrency markets. BlackRock Inc. filed. , the world’s largest asset manager, last week to launch a spot bitcoin exchange fund.