Includes MTF, 5MLD, custody and brokerage permissions
Archax confirmed today that it has become the first-ever FCA-regulated digital securities exchange and custodian in the UK. Analysts say this means, for the first time, digital issuances from across the world will be able to trade on an FCA-authorized secondary market and institutions will have access to a credible regulated trading venue on which to engage with the digital securities space.
At the same time, Archax has also become the first-ever company to receive its FCA cryptoasset registration, and therefore become a fully compliant VASP (Virtual Asset Service Provider). This FCA registration was introduced earlier this year as part of the amended Money Laundering Regulations (5MLD) and is now mandatory for all cryptoasset firms.
It is generally agreed that, in the current global economic climate, providing new, efficient ways for small and medium-sized businesses to access capital is key. “Blockchain and tokenization 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,” said David Lester, former Chief Strategy Officer of the London Stock Exchange Group and Advisor and Non-Executive Director at Archax. “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,” Lester said.
Built by a team with deep traditional financial markets experience, Archax has been designed from the ground up to be a global, regulated, digital asset exchange targeted at institutions. Using class-leading matching engine technology and market surveillance from Aquis, and R3’s private, permissioned Corda blockchain for post-trade, Archax can easily integrate into existing trading workflows and delivers instantaneous real-time settlement. Archax’s FCA regulated exchange status will also give institutions the confidence that all the controls and processes needed and expected are in place.
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. The authorisation covers three key areas: MTF (Multilateral Trading Facility) permissions, to allow it to operate the first ever regulated digital securities marketplace in London; CASS custody permissions, to allow it to offer a regulated custody service for both digital assets and client cash; and brokerage permissions, to allow it to face off to the widest range of participants.
Graham Rodford, CEO at Archax, confirmed that the company had been talking to the FCA for a while and the application process was a tough journey. “Our technology partners are second to none, we have a pipeline of 35 digital issuances in place, and we are signing up global brokers and market makers ready for go-live,” Rodford said. “This is an exciting moment for Archax and a great step in the evolution and legitimacy of digital securities globally,” he added.
Industry watchers say digital securities take real-world assets, such as equity, debt or funds, and tokenize them using blockchain technology. This not only modernizes 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 democratized participation through genuine fractional ownership and the creation of global secondary markets.
“Digitally native assets are not just about new financial instruments. They will also revolutionise all existing traditional financial markets in time too. They bring huge efficiencies from activities happening ‘on chain’, which will particularly benefit the post-trade space”, concludes Rodford.