Sep 21, 2023

Non-custodial hybrid exchange Ankex moved from alpha to beta testing this week.

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. All right, a new crypto firm is trying to solve the CFI problem by building an exchange that it says offers sophisticated trading services and is fully non custodial. A moved from alpha to beta testing this week and joining us to discuss is A E CEO Michael Morrow. Welcome back to the show, Michael. Good morning. Thanks for having me. Good morning. All right, you've been in alpha for almost a year. Talk to us about what you've learned any new developments since you were last on the show? Sure, happy to chat. So an actually got started in November. Um when uh Credo decided to incubate its take on kind of the future of crypto exchanges. Um I joined as CEO in April. Um and we actually entered alpha just about a month and a half to about two months ago. Um So we've been on this journey of uh of, of testing the platform um with some internal testers as well as some outside users on the platform, um getting some liquidity added to the platform and we finally reached our beta status. So we've had a waiting list um of about 17,000 folks that we've started to slowly let on to the platform to continue to test. Um and, and, and give us feedback ultimately on the functionality. So it is a big milestone for us to get people um actively using on the platform. So what does this mean? Uh you, you know, you, you have a, a situation where uh people can, they, they can trade but they have their own custody, right? They, they control the custody of their, of their, of their coins. So God forbid you guys go out of business. Something happens. They don't have to sit there in court in the Bahamas or in the United States or wherever it is. You guys are uh and worry about it. But that said, first of all, what operations wise uh for as a user, what what happens? Well, you know, what's the difference between trading with you guys and trading with a centralized exchange? How do I notice any difference? Is there a lag um is there an issue with liquidity? Uh how is liquidity handled differently on your exchange versus a centralized, a more centralized exchange where everyone's coins go into one giant wallet and uh God help you with everything. So I, I think it's important to kind of differentiate how an E is ultimately set up. They think about traditional CFI off exchange, um off chain custody uh exchange stack rather. So the matching engine, the risk engine, the central limit order book exists off chain um similar to how um C I exchanges are organized. The only difference that the custody part is on chain. Um So we're combining what we think is kind of the best of both worlds here, of kind of the the the traditional investors being able to execute sophisticated trading in C I with low latency and sort of high frequency trader friendly. At the same time trying to bring back kind of the the not your keys, not your crypto ethos um on the on chain custody piece. And so it's not speed, it's not any different than trading on a CFI exchange from a trading perspective, except for the fact that the coins remain in, in your wallet at all times. There is no sort of exchange wallet concept here but users are able to um and certainly on our road map, be able to bring your own wallets. Um and and ultimately be able to trade on akes without pref funding an account or you know, having to send coins to an exchange before you're able to ultimately start trading. You can plug and play with your own, with your own wallet. Uh Once you're set up on a, can you talk a little bit about the regulatory challenges you might face with an exchange like this? Where is this exchange operating? And what are some of the regulatory challenges? Sure. So we're, we're getting licensed in the British Virgin Islands. So we're going as a virtual asset service provider in the BB as a first step to getting licensed. And we are going to be getting licenses globally and slowly continue to upgrade the licenses that we get all around the world so that we're able to offer our products and services to more people and more geographies around the world. The regulatory challenge ultimately is that separating custody and trading is actually a new thing in the crypto space. It's obviously well known in TFI, but it is a new concept to regulators trying to regulate crypto when they come to exchanges. Custody is a part of the regulatory framework. Um And that piece is, is ultimately not responsible um for, for a ce because other providers are ultimately doing that. And so separating out those two functions has actually been interesting as folks in the regulatory space try to figure out, ok, what rules apply to an A ce that is non custodial um in its entire nature and all they're doing is kind of providing liquidity um in, in a, in a low latency type of way. Does that change? KYC? Am li I mean, you're in BV I, the rules are a little bit lax there compared to say New York State. But does the fact that you don't have custody uh of, of people's coins make it uh say more laxed if you will uh because of it, the, the uh the AM OKYC aspect is exactly the same. So people have to on board provide information about who they are to create an account ultimately on an um but uh and we will be do kind of know your transaction type of stuff as well of trying to figure out which coins are ultimately coming in. And do they meet some of the, the the the information that they provided to us at the time of the onboarding? Um But the difference comes between, OK, how do we implement the travel rule concepts like that? Where folks, I mean, in the exchange space generally are still trying to figure that out. But you know, the how can a non custodial exchange basically be able to comply with kind of sending and receiving, you know, information about who the coins are coming from and all of that when the exchange itself and an isn't a part of ultimately that transaction. And so those are some of the nuances, I think we're trying to figure out, I guess the sanctioned individuals such as those who may be involved in the situation in Ukraine and Iran, et cetera. Uh like what kind of protections are or what kind of things are you putting in place that would, let's say keep them off the exchange or do you let them, do you let them go on? No, um our KYC AM restrictions. Um So restrict kind of old fat part, you know, people live in all fat countries and, and other jurisdictions around the world regulator and, and because we're setting up in the BB, I, um we are not serving us clients for instance. And so there is a go blocking and, and, and obviously kind of blocking on the A Lkyc side on boarding side of the house as well until we have the proper licensing to be able to serve those geographies and customers. You, so you just said you're not serving us clients. Have you had any conversations with American regulators that kind of led you to making that decision or have you just kind of stayed out of the jurisdiction entirely? So it's a couple of different things. One, we're starting off with perpetual features um on our exchange. Um and uh CFCCFC does not regulate perpetual features at this point in time, it is a product type that does not exist in. Um And so, uh we have to work on, on with the regulators and have conversations about how perpetual futures works and, and getting them ultimately comfortable with regulating that um as opposed to um kind of like term futures contracts that they're typically ultimately regulating. But at the same time, um the regulatory and compliance burn that it requires that is required to comply with a license like the CFTC is very, is, is significant. Um and the technology build um is, is also significant as well. And So for a startup exchange like ours, um, we have quite a bit of work to do, um, to be ready to apply for that license. Um, certainly in the United States. And so it is certainly on our road map. Um, but it is not a near term road map item. It is certainly a couple of years away. Um, but, uh, for us, you know, luckily the rest of the world is a very big place and, and, and there's plenty of volume and, and clients to be able to serve around the world. Um And then once the US is, is we feel is, is, is, is, is a good market for us and, and from a timing perspective, um we will certainly look to enter the U when it makes sense. A couple of years away. Sounds like a really long time to be operating in the rest of the world leaving the US out of the market. I mean, what are your thoughts on, on the regulatory sphere in, in the US? It feels like it's really getting left behind here. Yeah, you know, it's, it's unfortunate. Um And uh it's, it's, you know, I'm not surprising anybody when we say that the US and crypto don't get along. Um And so, you know, that, that's a sentiment that ultimately kind of needs to change whether that's kind of politically and, and, and regulatory. Um But for us, you know, um the narrative that kind of the innovation and job creation and things like that that are happening abroad is 100% true. Um I am not hiring anybody in the United States. All of my hires and employees at an are going to be non us and kind of scattered all around the world. And so, um you know, part of that is obviously fantastic talent and kind of getting used to kind of remote hiring. But at the same time, there is a conscious effort here to avoid hiring within the United States, um which certainly kind of goes along with kind of the innovation and, and, and hiring and employment in the crypto space, especially occurring outside the shores of the US. All right, Michael. And just before we go, uh you were previously the CEO at Genesis Trading, we learned this week that Genesis ceased all crypto trading services. Any reaction to that news. Yeah, look, I, you know, I left Genesis, you know, now over a year ago. Um and obviously, lots have happened since, since my departure. Um I, I think ultimately, I'm, I'm sad um about what happened. Um And, you know, I've been following kind of the news along with everybody else. Um But ultimately, you know, I think Genesis had um you know, one of the most important roles in kind of creating um an institutional asset class and, and, and making Bitcoin and crypto trading um for institutional investors a thing um which didn't exist before. So I'm certainly proud of, of everything that we accomplished previously. Um But at the same time, you know, I can't help but be disappointed and sad at that how things turned out. Um, and certainly wish everyone there all the best. Um, because I know they have fantastic and bright futures ahead for them in, in crypto as they go on with their careers. All right, we should just quickly note the Genesis and Coindesk are both owned by DC G. Michael. Thanks for joining the show this morning. It was a pleasure chatting to you again. Thanks for having me. That was a E CEO Michael Morrow.

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