Reflecting on the past few years, it’s fair to say the new normal is almost unrecognisable from a couple of years ago. The prolonged impact of COVID-19 has augmented almost every aspect of our lives, squeezing levels of progress and innovation you would expect to see in a decade into just two short years. Everything from our working habits to the way we shop and even socialise has been upended. But one undoubted success story in this time has been rise of cryptocurrencies.
By Jenna Wright – Reflecting on the past few years, it’s fair to say the new normal is almost unrecognisable from a couple of years ago. The prolonged impact of COVID-19 has augmented almost every aspect of our lives, squeezing levels of progress and innovation you would expect to see in a decade into just two short years. Everything from our working habits to the way we shop and even socialise has been upended. But one undoubted success story in this time has been rise of cryptocurrencies.
We know that cryptocurrencies date back to shortly after the 2008 global financial crisis, when Satoshi Nakamoto’s paper laid the groundwork for a new, exciting asset class. But the decade that followed brought very little to shout about; digital assets remained niche, barely existing on the radar of investors, regulators and without doubt the man on the street. What a difference a decade makes!
LMAX Digital, launched in 2018 by LMAX Group, a leading FX exchange operator, has very much been part of the journey. Our mission was clear: to legitimise the cryptocurrency market by offering institutional investors a platform on which to acquire, trade and hold cryptocurrencies securely with high quality, deep liquidity.
We see a few aspects that are key to helping different institutional investors tap into cryptocurrencies. Let’s start with regulation, something we see as essential to any market.
Back in early 2019, LMAX Digital was granted a license as a Distributed Ledger Technology (DLT) Provider from the Gibraltar Financial Services Commission (GFSC). We chose to get regulated by the Gibraltar Financial Services Commission, because we view the DLT framework as one of the leading in global regulation of the cryptocurrency market.
The DLT regulatory framework provides clear benefits for us as an exchange and ultimately our clients, ensuring our business operates with best-of-breed security, compliance, KYC and anti-money laundering policies and procedures, and market participants are treated equally regardless of status, size or activity levels.
LMAX Digital complies with the nine regulatory principles set out in the GFSC’s DLT regulation, designed to protect consumers and businesses using digital assets stored or transmitted on distributed ledgers. These regulatory principles include robust risk management processes, effective corporate governance, high standards of customer care, systems and security controls to combat financial and cybercrime, and adopting standards of honesty and integrity.
Rather than establishing rigid rules, the DLT framework is based on principles, ensuring a flexible and adaptive regulatory regime which should remain adequate as the industry grows. Gibraltar is a hub of innovative and savvy individuals with a technological background and a pool of service providers that understand the industry.
Ultimately, we believe regulatory input is essential for the growth of the cryptocurrency market. A clear framework provides clarity and certainty for the asset class and institutional investors alike.
At LMAX Group, we seek regulation. We believe it sends a message to investors that they can have faith in the integrity of the operations, technology and the ability of our business to serve our clients. In essence, regulation is a crucial component of this market and serves to increase confidence and the appeal of our products and services.
It is under the DLT regulatory framework that LMAX Digital has become LMAX Group’s fastest growing exchange and achieved profitability just five months after launch, a remarkable achievement in its own right. Today the exchange offers spot cryptocurrency trading to over 600 institutional clients around the world and has secured ~9per cent of market share across the entire cryptocurrency market.
Today, LMAX Digital is a key component of a wider business valued at USD1bn, following the sale of 30per cent of LMAX Group to JC Flowers in July 2021. With recent volatility in markets and increased interest from institutions to enter the space, the business has taken this in its stride and has spearheaded the rapid growth of LMAX Group.
The recent success of LMAX Digital is proof that institutional grade infrastructure and best in practice AML and KYC, combined with credible regulation, has created a market leading proposition for institutions across the globe to trade cryptocurrencies efficiently and securely.
However, we are by no means complete in our growth story across the world; on the contrary, we are only getting started. In this, we are both a reflection, and a driver, of the exponential progress we have seen across the industry in the past 18 months. The best companies don’t stop innovating and LMAX Digital will continue to do so for its clients.
To stay ahead of the curve, investing in our technology is our main priority and it is by far our biggest operating cost. For example, we rewrite about a third of our code every year and are continuously enhancing and developing our technology stack to meet the performance and capacity demands our clients have come to expect. Needless to say, we don’t have legacy systems.
Furthermore, we have and continue to employ some of the brightest and best minds in the worlds of technology and cryptocurrency trading, as well as operations experts. What I believe sets LMAX Digital apart as a business is our entrepreneurial focus, from each and every one of us, to build a world leading cryptocurrency exchange.
The growth story of LMAX Digital has been built on innovation and the ability to provide the single best service to our clients around the world. Being regulated by the Gibraltar Financial Services Commission’s effective and flexible framework is a key part of this. Last year, 2021, was been a year of growth for us and we’re proud to offer genuinely innovative products for our clients. In such an uncertain time for markets and society alike, our aim is to continue to invest in our business, be at the forefront of developing regulation for the market and set LMAX Digital and the asset class on a trajectory for sustained growth.
Jenna Wright, Managing Director, LMAX Digital
Jenna joined LMAX Group in January 2009. Prior to becoming Managing Director of LMAX Digital in 2017, Jenna held multiple senior managerial roles at LMAX Group, including Head of Broker Operations and Head of Client Services. Prior to LMAX Group, Jenna worked at Cantor and UBS. Jenna holds BA in Economics & Politics from the University of Manchester.