Seed CX has taken its first big step to bring institutional investors to the crypto space.
The Chicago-based exchange startup announced Wednesday that it had launched a bitcoin spot trading market for its major clients, offering a regulated platform with “a deep book of liquidity.” Interested clients can access the market through a web API, a graphical user interface or the financial information exchange (FIX) protocol, according to a press release.
Seed CX, which has raised $25 million since its inception in 2015, is now offering a licensed exchange for institutional trading and settlement. At some point in the near future, it will begin offering a market for crypto derivatives regulated by the U.S. Commodity Futures Trading Commission (CFTC).
“We’re offering truly institutional level support. We are live,” said Seed CX co-founder and CEO Edward Woodford.
He told CoinDesk that at launch, the exchange will offer a bitcoin/U.S. dollar trading pair, with plans to add dollar pairs for ether, litecoin and bitcoin cash by the end of the month.
“In February we’re going to be offering more trading pairs, so we’re going to be offering up euros and Japanese yen,” he added.
Woodford explained that Seed CX’s offering targets institutions looking at the market after months of price declines, adding:
“The narrative right now is ‘low prices, low prices, low prices,’ and the question is how do we respond to this. In a sense, we’ve launched months ago [by on-boarding early clients], but now we’re getting a whole bunch of clients looking to decrease their operational risk.”
Managing risk
As part of these efforts to decrease risk, the exchange plans to help investors with margin trading, use larger tick (minimum price movement) and contract sizes than retail trading platforms and employ tighter quote requirements for its clients.
Clients can also post non-traditional assets (including digital assets) as collateral.
All U.S. dollar deposits to the exchange will be stored in regulated banks and insured through the Federal Deposit Insurance Corporation (FDIC), while digital assets will be stored via Seed CX’s wallet infrastructure. Rather than storing all its clients’ crypto in one big pot, as many crypto exchanges do, Seed CX maintains segregated wallets for each client.
As part of its pitch to potential clients, the exchange also noted that it does not trade against customers (and it forbids employees from trading crypto). Its subsidiary, Zero Hash, is a Financial Crimes Enforcement Network (FinCEN)-registered money service business (MSB) and licensed money transmitter in nearly 30 U.S. states.
While the ongoing crypto bear market has resulted in multiple firms tightening their belts and otherwise cutting back, Woodford said both the number of clients and their composition signing up with Seed CX has increased in the past several months.
Whereas before, interest came from crypto startups, he said that there is “now greater external money.”
“It’s groups that aren’t just based in the crypto space. The price normalization hasn’t stopped legitimate large groups [from entering],” he added.
Seed CX office image courtesy Seed CX