Business

Erik Gibbs

New institutional exchange hopes to take on the heavyweights

Bakkt and Fidelity Investments are going to have some competition. A new U.S.-based cryptocurrency exchange targeting institutional investors is planning on making its entrance into the space this month and will begin spot trading in Bitcoin Core (BTC) as of March 11. 

LGO Markets out of New Jersey made a soft launch on Monday, introducing only account creation and funding. It reports that it already has 10 institutional clients on board, including hedge funds, over-the-counter (OTC) trading desks, market makers and crypto-based businesses. The company’s CEO, Hugo Renaudin, adds that another 56 clients are currently engaged in the paperwork drill to participate on the platform.

The company is getting ahead of the competition, launching before Bakkt and Fidelity can introduce their solutions. Those platforms aren’t expected to be an issue, as Renaudin explained to CoinDesk, “There are roughly 400 institutional clients that are currently trading in the cryptocurrency market. We estimated this by talking to the crypto-friendly banks. Among these 400, it’s mostly hedge funds, proprietary trading firms, OTC brokers, a few family offices, asset managers and purely crypto players like lending providers that consider trading bitcoin as a part of their business.”

In order to introduce the exchange, LGO, through its office in France, ran an initial coin offering (ICO) just over a year ago that saw it receive 3,600 BTC (about $32.5 million at the time). The company was then known as the Legolas Exchange. That ICO was reportedly conducted in compliance with French laws and no U.S. residents were allowed to invest. 

Eventually, LGO will allow its own native token, the LGO, to be used by customers to pay trading fees. However, this is not expected to be available when the platform goes live. 

In order to trade on LGO, customers must first create a multi-signature wallet. Fund movements can only take place using two of the three private keys associated with the wallet, with one key being held by the customer, the second by LGO and the third by Altcoinomy, a company in Switzerland that will act as the exchange’s clearinghouse. 

Additionally, customers will also need to open an account with Signature Bank, the platform’s fiat on-ramp. Using the bank’s blockchain-based settlement platform, Signet, customers will be able to send fiat to purchase BTC. The sale of the digital assets will involve a multi-step process, with the trade being initiated using the customer’s key, then being passed from LGO to the clearinghouse, where it will be signed and settled. Altcoinomy is ultimately responsible for conducting the crypto transactions. 

The convoluted process is meant to protect customer assets. Renaudin explains, “Even if, say, we get hacked or I die like the guy from QuadrigaCX, or the office gets burnt down, the clients still can retrieve their funds, because with their own keys and the keys of the clearing firm they can move their funds and go back to their normal life.”

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