AlternativesAugust 24, 2020

FCA Authorizes Archax as First Digital Securities Exchange in UK

The firm already has 35 digital issuances in place.

Reported by Michael Katz

The UK’s Financial Conduct Authority (FCA) has authorized London-based Archax to be the country’s first regulated digital securities exchange and custodian. The firm is also the first company to receive its FCA cryptoasset registration to become a fully compliant Virtual Asset Service Provider (VASP).

Archax has a pipeline of 35 digital issuances in place, and said it is signing up global brokers and market makers. The company is using matching engine technology and market surveillance from Aquis Technologies, and enterprise blockchain software firm R3’s private, permissioned Corda blockchain for post-trade.

The firm also has been regulated by the FCA as a small- and medium-sized enterprise growth market, which means it can provide new channels for capital raising, as well as a secondary market for digital instruments to trade. The authorization covers the areas of multilateral trading facility permissions, client assets sourcebook custody permissions, and brokerage permissions.

Archax said that “tokenizing” real-world assets using blockchain technology not only modernizes and simplifies the capital raising process, it also helps facilitate liquidity in assets that are difficult to trade. Digital securities also enable democratized participation through fractional ownership and the creation of global secondary markets, according to the firm.

“Digitally native assets are not just about new financial instruments. They will also revolutionize all existing traditional financial markets in time too,” Archax CEO Graham Rodford said in a statement. “They bring huge efficiencies from activities happening ‘on chain,’ which will particularly benefit the post-trade space.”

The FCA became the anti-money laundering and counter terrorist financing supervisor of businesses carrying out certain cryptoasset activities in the UK on Jan. 10. The regulator’s deadline for businesses that conduct cryptoasset activity in the UK to register to comply with new regulations was at the end of June to make sure applications were processed on time. The FCA said any new businesses that began operating after Jan. 10 must be registered with the FCA before carrying out any business.

Although Archax was the first FCA-authorized digital securities exchange, it isn’t the only one. London-based Gemini Europe LLC, a cryptocurrency exchange and custodian and the European affiliate of Gemini Trust Company, was authorized by the FCA the day after Archax received its authorization.