You could soon use digital currency to bet on Elon Musk and Jeff Bezos
- DX.Exchange, an Estonia-based crypto exchange, has plans to launch digital tokens tied to 10 popular Nasdaq stocks.
- The trading venue purchased the rights to use Nasdaq's matching engine and market surveillance platform, SMARTS.
Fanboys of both crypto and Elon Musk can rejoice. The two worlds might soon collide.
Estonia-based DX.Exchange, a digital currency trading venue launching January 7, hopes to soon begin offering digital tokens tied directly to Tesla stock, among other Nasdaq-listed companies. The product will give clients in the crypto space outside the US, both institutional and retail, the ability to gain exposure to US-listed companies without having to deal in fiat currency and through traditional venues and trading hours.
The digital stocks, which will be initially offered on 10 of the most popular Nasdaq-listed companies and can be purchased with fiat or certain digital currencies, will be tokenized shares that sit on the Ethereum blockchain, backed by traditional shares. In addition to Tesla, DX.Exchange will tokenize shares of Alphabet, Apple, Amazon, Facebook, Microsoft, Netflix, Baidu, Intel Corporation and Nvidia.
MPS MarketPlace Securities, an affiliate of the exchange headquartered in Cyprus, will initially serve as the sole market-marker of the digital stocks for the exchange, purchasing and holding the stocks backing the tokens.
"We really felt that [digital stocks angle] was a bit more of a game-changer than launching just a traditional crypto exchange," said Daniel Skowronski, DX.Exchange's CEO and co-founder. "By adding this type of product where we are getting now the worlds of crypto and finance to really collide, it takes it to a whole new level."
The exchange's platform for trading cryptocurrencies will go live January 7, however the digital stocks will operate under a multilateral trading facility (MTF) license that is still pending final approval from Cyprus Regulator, CySEC, Skowronski told Business Insider. He hopes to receive it in Q1, ideally in January.
DX.Exchange will not initially accept US customers. While an MTF license, the US equivalent to an alternative trading system, does open the door for bringing on US clients, Skowronski said, additional regulatory requirements would be required. The digital stocks would also need to be approved by the Securities Exchange and Commission if they were offered to US customers.
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The exchange purchased the rights to use Nasdaq's matching engine and SMARTS Trade Surveillance, widely used by exchanges in traditional markets, to monitor potential market manipulation. DX.Exchange is one of the earliest adopters of the technology in the crypto space, according to a spokesperson at Nasdaq.
The launch comes at an inflection point in the crypto world. Digital currencies were hammered in 2018 after skyrocketing in value in the second half of 2017. In fact, it was during that time Skowronski scrapped his original business plan of opening a derivatives exchange in lieu of a crypto trading venue. He said an opportunity existed in the space for a regulated exchange with good technology.
As the market began to turn in 2018, he felt the need to differentiate the offering. Last summer Skowronski decided to pursue the idea of offering security tokens for listed stocks as well.
The crypto market is now in a much different place than it was just over a year ago, when the price of bitcoin was nearly touching $20,000. The appetite for offerings in the digital currency space is not what it once was. Still, Skowronski maintains his faith in the technology, and said now is the best time for new products to be launched.
"In a lot of the downturns, this is where the innovation really comes into play," Skowronski said. "When your back is against the wall, you really need start being able to be creative and really think about how to disrupt things and I think that is where sometimes really great ideas are born."