Pass through St. Paul's Cathedral, a religious holy place, and come to Paternoster Square, where the 23-meter-high Corinthian column stands, and the 246-year-old London Stock Exchange Group office building is located here. Also nearby are investment banks such as Goldman Sachs, Merrill Lynch and Nomura.
On November 27, the building welcomed its first cryptocurrency partner. The exchange AAX held a press conference here, announcing the formal cooperation with the London Stock Exchange Group (LSEG) and joining LSEG's global partner platform.
AAX, a Hong Kong-based cryptocurrency exchange, has been working with LSEG since January this year, applying the latter's Millennium trading technology to its trading system. The exchange was officially launched on November 7 this year.
AAX launches just in time forIndustry inflection point: As exchanges enter stock competition, the industry generally believes that compliance and institutional entry are the future battlefields. However, the frustration of Bakkt's launch has punctured the myth of institutions entering the market; the industry lacking new traffic has squeezed out dividends, and upgrades have been hindered. Some exchanges have embarked on an extremely sinking "model road" and launched the controversial MLM currency ; Finally, all parts of China raised their fists to rectify virtual currency transactions.
These seem to make AAX face greater challenges. Odaily interviewed AAX CEO Thor, COO Michael Wong and consultant Jamie Khurshid on the above issues at the press conference.
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Industry regulation is beneficial to protect investors
On the 22nd of this month, the Shanghai headquarters of the central bank issued "Increasing Supervision and Prevention and Cracking Down on Virtual Currency Transactions". After the news was released, Bitcoin fell by 11% in a short period of time, and the platform currencies of various exchanges plummeted by 30%. At present, the price of Bitcoin has rebounded, while the price of exchange platform currency is still weak.
Just the day before (21st), the Shenzhen Mutual Finance Office also issued a risk warning on preventing illegal activities of "virtual currency", requiring that the investigation work must be completed before November 25th. On the 22nd, the Shenzhen Local Financial Supervision Bureau has identified 39 companies suspected of carrying out illegal virtual currency activities through the Lingkun system.
According to the Beijing News, all members of BISS involved in US stock trading have been arrested by the Beijing police, and the case has been classified as illegal fund-raising fraud.
The impact of this rectification, Thor believes that it will help protect the interests of investors and at the same time promote the compliance of the industry. AAX has paid great attention to KYC (Know Your Customer) and AML (Anti-Money Laundering) since its launch.
At the same time, it is AAX's plan to adapt to the regulatory policy operations of different jurisdictions and apply for licenses in many places around the world. According to public information, AAX has obtained licenses in Malta and Estonia, and is applying for licenses in other regions.
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Existing investors need new liquidity
For institutional clients, AAX's unique advantage is naturally backed by the London Stock Exchange. According to Odaily's previous reports, the London Stock Exchange will provide AAX with operational, technical and compliance support.
According to AAX, LSE will be deeply involved in the operation of AAX and bring a large number of potential institutional user resources to AAX. LSE's Partner Network (partner network) has access to more than 300 companies. The strategic cooperation between AAX and the London Stock Exchange makes AAX the highest-level partner in the network, through which it can directly connect with the institutional clients of the London Stock Exchange.
Since the beginning of this year, bringing institutions into the market has been a story told by many compliant exchanges, and this is also one of AAX's visions. However, when we discuss this proposition, we often refer to cryptocurrency-native funds such as Grayscale; the real traditional financial giants are still standing still and not participating in the transaction.
This means that in the current stock market, the main "institutional customers" are still large natives such as cryptocurrency quantitative funds. They have long-term cooperation with Coinbase, OKEx and other cryptocurrency exchanges. Why choose AAX?
"We learned that the existing top cryptocurrency funds are not only traded on one exchange, but most of them may cooperate with the top 20 exchanges." Thor said that the choice of exchanges for existing funds is not exclusive. If there is a better depth, higher performance, lower latency and more secure exchange options, why not choose it?
Moreover, because the industry is facing growth bottlenecks, quantitative funds need more incremental liquidity. Michael believes that AAX is different from existing cryptocurrency exchanges, trying to follow the trading paradigm of traditional markets.
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Traditional institutions have opened cryptocurrency departments
When it comes to the incremental market, it is inseparable from the participation of traditional financial giants in cryptocurrency transactions. Bakkt, which was highly anticipated by the public, did not perform as well as market expectations after its launch. This makes the long-dreamed myth of "institutional entry" that will drive the next round of bull market come to nothing.
However, Bakkt's slow growth does not seem slow to Jamie from the traditional financial industry. He said that the cryptocurrency market is still a new thing for traditional investors, and the investment scale is also the tip of the iceberg. There is really no need for them to put their reputation at risk because of rush. When the regulation is in place, the technology matures or other suitable time points, they can enter the market with confidence. What the exchange has to do is to do basic work such as security and compliance, and institutions can come in at any time.
In addition to security and compliance, Odaily interviewed traditional financial institutions before and found that one of their concerns is that they failed to find a suitable valuation model and positioning for cryptocurrencies such as Bitcoin, making it difficult to assess their fair value.
"Valuation models are a big issue, and the whole industry is discussing them." Thor observed that the market has begun to become more rational, paying more attention to products and business models. Many companies are promoting industry applications, so that there is more and more data, and maybe user data can be discussed. At this time, there is no valuation model to speak of.
As for Bitcoin, AAX believes that it is attractive to traditional financial institutions, or because its volatility has no correlation with traditional assets, in order to hedge risks.
Interestingly, there is no consensus valuation model for Bitcoin. Once formed, is it possible to form some kind of correlation with traditional assets?
Khurshid admitted that it is indeed possible, "We are also looking for valuation models, and I am personally looking forward to seeing the correlation." The valuation model of Bitcoin needs to be explored, but Thor feels that we should pay more attention to the potential of the underlying technology. If the blockchain is applied on a large scale in the future, everyone will definitely not forget the first application, namely Bitcoin. The fact is that among AAX's cooperative clients, there are already large institutions that have opened digital currency trading departments.
Back to the market in front of us, in Thor’s view, the recent growth of the cryptocurrency market is more driven by news and event factors, and such growth is often unsustainable. He believes that after the ICO era, the continued growth of the market in the future requires the support of a wider range of landing applications.
