Backed by Wall Street, EDX Markets crypto exchange launches, offering Bitcoin, Ethereum services amid SEC scrutiny
EDX Markets, a new crypto exchange backed by major Wall Street players such as Fidelity Investments, Citadel Securities and Charles Schwab, will offer Bitcoin
Bitcoin, Bitcoin Cash, Ethereum and Litecoin are not named securities by the U.S. Securities and Exchange Commission.
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New Jersey-based EDX has also completed a new funding round from investors, including options exchange operator Miami International Holdings and affiliates of proprietary trading firms DV Trading, GTS, GSR and Hudson River Trading, the exchange said in a press release Tuesday.
Unlike other centralized crypto trading platforms, EDX said it adopts “non-custodial model designed to mitigate conflicts of interest,” which means the exchange does not directly handle customers’ digital assets. Instead, it operates similarly to traditional stock markets where brokerage firms book orders from investors, as reported by The Wall Street Journal Tuesday.
EDX also plans to introduce a clearinghouse later this year to facilitate the transactions and exchange of payments, but will still refrain from directly holding investors’ assets.
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The risks intertwined with custodial models became evident last year with the collapse of the Bahamas-based exchange FTX. The U.S. SEC also leveled allegations against Binance, the largest cryptocurrency exchange in the world, accusing it of mixing customer assets.
In a move that has sent shockwaves through the cryptocurrency world, the recent launch of Fidelity and Schwab-backed EDX Markets has raised concerns about increased regulatory pressures from the U.S. SEC and the perceived encroachment of traditional finance into the crypto space. This development, coming hot on the heels of BlackRock’s application for a Bitcoin spot ETF, signals a shift in the dynamic between the fledgling crypto industry and the established financial powerhouses.
BlackRock, as the world’s largest asset manager, is a formidable player. With an impressive track record of a 575 to 1 success rate with the SEC for ETF filings, it’s a force that’s hard to ignore. Its unprecedented move into the Bitcoin ETF space — a domain where the SEC has so far shown relentless rejection — may point to a seismic shift in crypto markets, potentially tipping the scales in favor of traditional finance, a scenario that’s not sitting well with many in the Web3 industry.
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Such concerns are compounded by the recent scrutiny faced by notable entities in the crypto banking sector — Silvergate Bank, Silicon Valley Bank and Signature Bank. These events have been labeled as “Operation Chokepoint 2.0” by critics, a nod to the perception that these enforcement actions are part of a larger regulatory strategy to unbank the crypto industry.
Recent punitive measures against major U.S.-based crypto exchanges like Binance and Coinbase arguably lend credence to this narrative. The vacuum left in the wake of these actions opens opportunities for traditional financial institutions to carve out a larger piece of the lucrative crypto pie in the world’s biggest economy.
However, this trend is not confined to the U.S. shores. The interest of TradFi in digital assets is gaining momentum globally. Deutsche Bank’s application to operate as a crypto custodian in Germany and Hong Kong’s recent overtures to its major lenders to embrace the crypto industry are cases in point.
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