Wall Street is rapidly closing on crypto trading. However, its model is slightly different from that used by traditional crypto exchanges. Enter EDX markets, a one-of-a-kind market that Wall Street wishes to use to reshape crypto trading. It is a non-custodial business model whose launch could signal a rather bullish future for cryptos in the market. Let’s delve into how the product works and its potential to influence the crypto marketplace.
What is EDX?
EDX is a crypto exchange created specifically for institutional investors. It was launched on June 20 and supported by large financial institutions like Fidelity Digital Assets, Citadel Securities and Charles Schwab. This cryptocurrency exchange offers a unique way to trade with crypto assets in a decentralized, non-custodial model where there is the least chance that the providers will get into trouble with the SEC.
The SEC has been very strict about how coin exchanges are run and has even sued the biggest exchanges, such as Binance and Coinbase. Therefore, all organizations dealing in cryptocurrencies are wary of getting into the SEC’s firing line.
An increase in the number of con exchanges is a welcomed move. As the number of people who are interested in crypto and use it on a daily basis increase, so will the need for additional coins. The coins are making their way into every sector of the economy, from online and merchant shopping to casino and video gaming. Enthusiastic gamers can try Tusk Casino for NZ players and enjoy the full power of crypto gaming.
Unfortunately, there are very few crypto products for institutions. EDX Markets will try to rectify that by focusing all its solutions on this market segment. At its launch, the exchange offered just four crypto assets. They include Ether, Bitcoin, Bitcoin Cash and Litecoin. However, they may add more coins if the regulatory landscape in the country changes.
Who can Trade with EDX Markets?
At the moment, the products offered by the EDX markets are only available to institutions. Therefore, retail investors cannot trade with the EDX. The backers of the market have not explained the reason for this. However, most analysts believe that this is to lower potential regulatory risks, as a business strategy and as a way to get a base to offer more products in the future.
How Does the Non-Custodial Model Work?
The non-custodial model is significantly different from what other coin exchanges are doing. In the model, the exchange does not hold customer crypto in its asset base. Instead, it uses a third-party custodian, such as a bank, to hold the assets. This business model, combined with a focus on institutional investors, keeps these backers in line with The US Securities and Exchange Commission (SEC) regulations.
This approach comes with several benefits. First, it reduces the risk of a loss due to security breaches or hacking of the exchange. This has been a serious concern, especially after a few exchanges lost their money. Second, the model deals with a possible comingling of assets held on behalf of the customers, such as the case with FTX.
What Fees Does EDX Markets Charge?
On launching, EDX provided a fee holiday to its new customers. This is a plan to attract more new users. However, it is expected that it will create a fee structure in the future. This has not been provided to the general public. The fees will have a significant impact on boarding new customers.
Are there Security Features for EDX Users?
As of now, there are no security measures that the EDX has offered to users in the public domain. It is expected that the backers have put in place some of the basic and core security features as per the SEC regulations for asset management organizations.
Second, the fact that EDX markets do not hold customer assets is also a security feature. This approach makes it hard for hackers to gain access to customer data and assets, as the market just stores customer data.
Has SEC Approved the EDX
SEC has intensified its crackdown on crypto exchanges. It is expected to react to this new development, but it has not so far. However, it is not expected to be very harsh on EDX markets for the reasons explained above. For a start, the non-custodial model makes it less of a target for strict bodies like the SEC. SEC primary focus is the retail market. Therefore, a focus on institutional customers will put the EDX off the hook.
Will EDX Markets Compete with Coinbase and Binance?
Coinbase and Binance’s primary target market is the retail market. EDX markets do not target the market as of now. Therefore, in this area, it may not compete with these traditional crypto firms. However, these exchanges also have a significant portion of institutional investors. Here, EDX will try to get a portion of them on its side.
Binance has plans in place to launch its own non-custodial service and Coinbase may follow suit. This would make EDX a direct competitor to both crypto giants. The non-custodial model may also be available to large retail investors, something that will guarantee them more security than is the case now.
