The first generation of bitcoin exchanges may have been a slapdash effort. Hacks, DDoS attacks, and regulatory challenges saw many of them fall by the wayside, sometimes taking customers’ bitcoins with them.
But a second generation of exchanges hopes to provide a smooth, safe, and most importantly, compliant experience for customers. One of these is CoinX, a US-based exchange serving customers both at home and abroad.
Megan Burton, founder of the company, explains that the founding team has invested over $1 million in the venture, which is currently in private beta.
She emphasizes the security of her exchange, and its regulatory compliance.
Burton has a 15-year background in IT security. She has been CEO of specialist security and IT services firm SeeGee Technologies since 2004, and worked at Logicalis and Dimension Data before that.
An encrypted database and application firewalls are two of the features that she discusses when talking about the security of the system.
She also hosts the service at the same facility used by “a major exchange”, which she won’t reveal, but which others say is the New York Stock Exchange (NYSE).
The service, which launched at the Money 2020 exhibition late last month, targets institutional investors, says Burton. “We are seeing more players who are in the alternative trading systems, or in the broker dealer market, or in the institutional investor side.”
Having said that, the company is not tailoring its pricing for institutional investors, particularly. There will not be any maker-taker options, for example, as there are with recently-launched UK site Coinfloor, or as New York-based Coinsetter (also in private beta) is planning.
CoinX takes a traditional approach, setting a sliding fee scale based on volume ranges. 500 bitcoins or under (we are assuming on a 30-day trading average – the site didn’t say) gets you a 0.3% trading fee. That falls to 0.1% for trading volumes between 100,000 and 150,000 bitcoins.
CoinX operates in three currencies: US dollars, euros, and pounds sterling (Burton has registered the exchange with the UK’s Financial Conduct Authority).
There are no direct deposit options for non-US users, however, and the company is not taking advantage of SEPA, the European direct payment network. Instead, users outside the 50 states will be limited to wire transfers for the time being. Why?
Burton admits that serving US customers can leave international banks sensitive to potential regulatory issues.
“They have a lot of regulatory pressure from the US. We are US citizens, and a US-based organisation, and the international community takes a little caution when dealing with US citizens who are heavily regulated,” she says. Coinfloor, conversely, locked out US customers while it focused on the UK market.
Back home, CoinX is grappling with regulatory challenges on the ground, and is not operational in all 50 states yet. FinCEN registration was easy, Burton says. It’s state-level compliance that takes time.
“Each state has different guidelines …read more