In all the ways that the cryptocurrency space has developed over recent years, one prediction that never quite came to fruition was the rise of tokenized securities. As the ICO boom died down, many predicted that traditional trading would soon be performed using tokens. As things stand, that prediction hasn’t turned out entirely in the way that crypto enthusiasts had hoped.
Regulators across the globe started to clamp down on cryptocurrencies, particularly as they interacted with the traditional securities markets. Perhaps an inevitable but unintended consequence of this approach is that an entire industry sprang up around unregulated derivatives. Whereas BitMEX was the originator of this phenomenon, others have now joined the fray, including Deribit, Bybit, Binance, and many more.
As a result, regulation has proven to be the most significant roadblock to the success of tokenized securities. Now, Currency.com has stepped up in response to this challenge by gaining regulatory approval to trade tokenized securities in the form of stocks, commodities, and bonds. Furthermore, users will be able to transact directly with the traditional financial markets, using their crypto, for the very first time.
Currency.com began in June 2018 as the brainchild of the owners of two venture funds - VP Capital and Larnabel Ventures. The pair came together and created the company with a view of developing the first legal, regulated cryptocurrency exchange in the Commonwealth of Independent States (CIS) region.
In November 2018, the company requested a residency at the High Technologies Park in Minsk, Belarus. Soon afterward, it was granted the right to operate as a regulated cryptocurrency exchange platform by the government of Belarus.
The company launched to the public in January 2019. Both VP Capital and Larnabel Ventures provided backing to Currency.com, with a reported $10 million in funding.
Since its launch, the company has steadily been expanding its range of markets and products. Most notably, it has established a partnership with Capital.com for the brokerage of securities. It also launched its own mobile app in May 2019.
Features of Currency.com
Currency.com has several features that help to set it apart from competitor trading platforms.
Regulation and Compliance
Among the biggest competitive advantages of being regulated is that Currency.com can work directly with banks. This means that users wanting to buy-in or cash-out in fiat currencies will face fewer obstacles than when trading with unregulated competitors such as BitMEX. The company has an established relationship with Sberbank, one of the biggest banks in Russia, with around $440 billion in net assets.
Belarus is one of the most progressive countries in the world in the way it approaches blockchain and cryptocurrencies. With a bespoke legislative framework that includes recognition of tokenized securities, it made sense for Currency.com to select Minsk as its base.
Currency.com complies with all relevant KYC and AML legislation and is audited by Ernst & Young, a Big 4 accounting firm. It also operates in compliance with the EU GDPR.
The company is aiming to become regulated in other countries down the road, including Australia, the US, and Asian nations.
As you would expect from a regulated platform, Currency.com scores highly on the security of user funds. Actions on the platform, including logins, funding, and trading, are protected by 2-factor authentication.
Behind the scenes, Currency.com servers are housed in a professional data center with protective measures, including video surveillance and armed guards. The majority of funds are stored in cold wallets that are isolated by air-gap, with a limited quantity in semi-cold wallets on protected machines with encrypted drives. Funds necessary to maintain exchange liquidity are stored on encrypted hot wallets.
Furthermore, all funds are kept in full reserve, meaning the platform can always make good on withdrawal requests.
Technology Partnership with Capital.com
Each time a user purchases a tokenized security on Currency.com, there needs to be an equivalent security purchase from the open market. Therefore, the company partners with Capital.com, which acts as a broker.
The transaction flow works as follows. A customer will purchase a tokenized security from Currency.com using their crypto. Under the hood, Currency.com uses fiat currency to buy the physical security from Capital.com. Currency.com then issues a token, representing ownership rights to the security, and sells it to the customer.
In this way, the customer is guaranteed to own the underlying physical security, with ownership represented by the digital token. Holders of tokenized shares are entitled to dividend payouts in accordance with their rights as shareholders.
Capital.com is regulated by the UK Financial Conduct Authority and the Cyprus Securities and Exchange Commission.
Customers can use their Bitcoin or Ethereum to trade a wide variety of indices, shares, forex pairs, commodities, bonds, or other cryptocurrencies. These include well-known funds such as the S&P 500, shares in publicly traded companies such as Apple and Google, or commodities including oil, gold, and even coffee.
Margin trading is also available with leverage of up to 100x.
Currency.com charges a crypto trading fee structure that is comparable to its largest competitors, such as BitMEX, with a taker fee of 0.075% and a maker fee of -0.025%. The full fee structure is shown below.
Users can fund their accounts using USD, EUR, GBP, RUB, BYN, or popular cryptocurrencies such as BTC, ETH, LTC, and others (see below). Currency.com accepts Visa, Mastercard, and ApplePay, or users can fund their accounts using a wire transfer from their bank account.
There are funding limits along with a fee structure for deposits and withdrawals, shown below in USD for funding with credit cards and wire transfer.
The rates for funding with crypto are generally more competitive than with fiat currencies.
Users can download the Currency.com mobile app from the Google Play or Apple App Store so they can trade on the go. The mobile app offers many of the same features available on the main platform, including portfolio overview, price tracking, and of course buying and selling assets.
The founding team of Currency.com are the owners of backers VP Capital and Larnabel Ventures, Viktor Prokopenya, and Said Gutsierev.
Viktor Prokopenya is a serial IT entrepreneur and investor who founded VP Capital. The investment firm has provided funding to fintech ventures, including Currency.com and Capital.com, along with AI and computer-vision specialists such as Banuba and Facemetrics. He has been awarded the Belarussian IT Entrepreneur of the Year three times and holds nine degrees from various international institutions in fields covering computer science, business law, and marketing.
Said Gutsierev is the owner of Larnabel Ventures and, according to Forbes, is worth $1.3 billion. He studied at the prestigious Harrow School in England before going on to graduate from Oxford University. He has extensive experience in the oil sector, having previously served as the CEO of Forteinvest, part of the Safmar Group.
Currency.com appears to have spotted a legitimate gap in the financial markets for tokenized securities and enables crypto to be used as a trading currency for traditional assets. Furthermore, it’s aiming to fill the hole by doing the legwork that many of its competitors have declined to embark upon in obtaining regulatory approval to operate.
So, given that it’s unlikely to risk the wrath of the regulators, the primary hurdle for Currency.com to overcome is that of marketing. The company needs to ensure it can gain traction with users to achieve a depth of liquidity that will sustain these new markets for tokenized securities in the longer term. If it can achieve this, it stands a good chance of blazing a trail at the convergence of traditional and crypto finance.
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