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First Digital Securities Exchange Approved by Financial Conduct Authority

Aug 25, 2020

Last week Archax - institutional-grade exchange for trading asset-backed tokens (digital securities, security tokens, etc.), announced becoming Financial Conduct Authority (FCA) regulated digital securities exchange and custodian in the UK. Archax has also become the first company to receive crypto-asset registration from the UK regulator, making it a fully compliant Virtual Asset Service Provider (VASP).

This is major step for the emerging global digital securities field. For the first time, digital issuances from across the world will be able to trade on an FCA authorised secondary market and institutions will have access to a credible regulated trading venue on which to engage with the digital securities space.

Non-Executive Director at Archax said: “In the current global economic climate, providing new, efficient ways for small and medium sized businesses to access capital is key. Blockchain and tokenisation are innovations that can empower more frictionless and transparent markets which, combined with an FCA regulated exchange like Archax, can deliver what capital providers, business leaders and founders now really need. The launch of the Archax exchange will help bring the institutional and digital asset communities closer together, and open up a new era for the global financial markets space.”

Archax has been regulated by the FCA as an SME Growth Market, which means it can provide new efficient primary channels for capital raising, as well as a secondary market for digital instruments to trade. These designations issued by the FCA, represent huge milestones on the company’s path to launching its secondary marketplace. A secondary market refers to a trading platform for previously owned securities – meaning trades occur between investors, rather than with a security’s initial issuer. These platforms are essential for the health of securities, as they provide investors with access to liquidity in their holdings. Digital securities take real assets, such as equity, debt or funds, and tokenise them using blockchain technology. This not only modernises and simplifies the capital raising process via disintermediation and removing frictions, but also helps facilitate liquidity in assets that are currently hard to trade. Digital securities also enable democratised participation through genuine fractional ownership and the creation of global secondary markets.

The FCA’s authorisation covers three main areas: Multilateral Trading Facility (MTF) permissions, which allow Archax to operate the first ever regulated digital securities marketplace in London; CASS custody permissions to allow Archax to offer a regulated custody service for digital assets as well as client cash; and brokerage permissions to allow Archax to face off to the widest range of participants.

This FCA authorisation was introduced earlier this year- from 10 January 2020, existing businesses (operating before 10 January 2020) carrying on cryptoasset activity in the UK were required to be compliant and registered with the FCA as part of the amended Money Laundering Regulations (5MLD) and is now mandatory for all cryptoasset firms. Companies which are not registered with the FCA, on 10 January 2021 will have to cease trading.

Following these new conditions and right after Archax, crypto exchange Gemini, a UK based subsidiary of the New York-headquartered exchange, also received permision from the FCA to start its operations in the UK. The UK regulator added Gemini Europe Limited, to its register on the same day it approved Archax. While Gemini is already operational in the UK, Archax is yet to launch its services. Gemini made its name offering crypto exchange and custodian services to institutions. It received the UK approval when it is aggressively expanding overseas operations.

In consideration of growing activitiy and posibilities conducting bussiness as regulated digital securities exchange and custodian in the UK, our Offshorelicense team are ready to establish your crypto exchange company in the UK.

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