NEW YORK, NEW YORK – AUGUST 18: The Nasdaq MarketSite in the Times Square (Photo by Roy … [+]
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Diginex (EQOS), the Singapore-based digital assets group went public with a Nasdaq listing last week. This is the first digital assets group with a crypto exchange to publicly launch in the U.S. and it has chosen to launch on Nasdaq.
With the ambiguous relationship that digital currencies and digital assets have with policy makers and regulators around the globe, this marks an historic event, and significant milestone for the digital assets sector and the financial services sector overall.
“When we started building Diginex, we felt strongly that we needed to help raise standards and the transparency of the industry in order to help it grow. Nasdaq was the ultimate destination as a technology company and now investors will be able to participate in the ‘picks and shovels’ of this burgeoning new asset class via the rich ecosystem built across the Diginex group,” says Richard Byworth, CEO of Diginex, and EQUOS, the group’s digital asset exchange.
Byworth started his banking career in London pricing derivatives for the French bank BNP Paribas and moved through financial centres of the world working for the Japanese banking firm Nomura where he led the build out of their derivative franchises across Tokyo and Hong Kong. Initially dismissive of bitcoin, he started to question that position after reading the book Sapiens by Yuval Noah Hariri, who discussed bitcoin as a logical progression in societal belief systems around money.
As an early stage investor, he supported Diginex founder Miles Pelham in the early development of the business. Miles approached Richard following his departure from banking to help build the strategy for the future of digital investment banking. What came next was a very deliberate design of a full suite financial services firm addressing the emerging and growing opportunities presented by digital assets.
Byworth has written a playbook that looks as if it will serve as a masterclass for smart capital focused on penetrating and growing the burgeoning future digital assets market. It seeks to occupy everything from the traditional payments space, to equity and debt assets, currencies and derivatives.
The keystone of Diginex’s digital playbook is its virtual currency exchange EQUOS. Launched in July, EQUOS is built using an advanced architecture designed to bring trust, transparency, and innovation to investors in the world of digital assets. The EQUOS roadmap delivers the infrastructure for managing derivatives and capital efficiency that is common in traditional markets but as yet unseen in the digital asset sector.
“Currently digital asset derivatives volumes are around three to four times the underlying crypto spot market if we include perpetuals, whereas traditional assets like FX or interest rates see derivatives volumes many hundreds of times the spot market. This perceived volume differential between digital and traditional finance is largely due to infrastructure and capital efficiency gaps. Daily volumes in this market can still 20x from here and this is what we have built EQUOS for,” says Byworth.
A grand ambition indeed, but when you look at what this team has already delivered, sceptics may take pause to reconsider. Diginex ‘first offensive’ play in the playbook was a ‘defensive pay’, they built an institutional ready custody solution, the Gordian Knot of crypto and digital assets that has prevented the big kids from jumping into the pool.
“Custody is a good example of how we are leading this space. Institutional investors in digital assets need to know that their assets are safe before they can even begin thinking about allocating capital. Diginex’s custody solution Digivault has been built by specialists from government security and technology infrastructure, and is the first and only Cyber Essentials Plus accredited (UK Ministry of Defence designed cybersecurity accreditation) digital assets custodian, and operates out of the vaults of global gold and diamond vault provider, Malca-Amit,” says Byworth.
Partnering with industry leaders has been a focus across the Group. Diginex’s multi-venue trading platform, Access, plugs into the portfolio management systems of two of the world’s largest trading technology providers: FIS
FIS
and ITIVITI. Any clients of either of these two traditional financial technology firms can now access the digital asset market utilizing the Access suite of algos and spread trading functionality to ensure best execution across a globally fragmented liquidity pool.
The firm also runs an asset management business under the brand Bletchley Park Asset Management, a tribute to the secret home of the UK’s World War 2 cryptographic code breakers. The firm runs a fund of funds that after years of research has understood many of the pain points for asset managers in this industry to allow them to allocate to this burgeoning asset class with fewer barriers and hassles. The removal of ‘pain points’ for professional investors is a core design principal that has been addressed in much of the EQUOS framework.
The final play in the playbooks is a full securitization advisory and distribution firm, EQUOS Capital that operates today in the traditional world, and provides buyers the option of taking their securitization investments in paper today and converting them to digital assets in the future, at the request of the investor. Byworth is a huge proponent of the future that blockchain can bring and the likely disruption this will bring to capital markets, but is aware that we are early.
“If you propose to a pension fund to invest in a digital asset today, you run into a whole host of complex issues. Once you have covered what a digital asset is, what a blockchain is, what protocol choice is, and what standard may be defined on that blockchain protocol, you have already lost the investor, and you haven’t even addressed the questions they will have around booking, custody and secondary market places. It ends up falling into the ‘too hard’ category. If you however, deliver investors a security they are used to dealing with and say that they can flip it into a digital security if they wish to in the future, all the obstacles are removed and you have planted another seed that will grow into a converted investor for the future,” says Byworth.
Diginex came to market via the now increasingly popular Special Purpose Acquisition Company (SPAC) route. After two rounds of SEC approvals and a COVID-19 impacted delay, the company listed on October 1, 2020. The Nasdaq listing comes with requirements that had the company remained private, it would not have had to address. An example of this is having a minimum of four non-executive directors and the quality of board members that the company has attracted is impressive.
Chi Won Yoon, the board’s chairman is a veteran of traditional finance having built the derivative business for UBS in the 90s and became CEO and President for the bank’s Asia operation sitting on the board for 12 years, and is is also a board member of Hyundai Motors. Paul Smith one of the NEDs was most recently President and CEO of the CFA Institute sitting on the board of multiple asset management firms. Richard Petty is a former Stanford professor, and sits on the Business 20 (B20) alongside the G20 leading the Financing Growth and Infrastructure taskforce.
There is no doubt that Diginex means business, as the first crypto and digital asset group to achieve a Nasdaq listing, they have paved the way for serious professionals to enter the space.
We will be keeping a keen eye on Diginex and the emergence of new digital capital formation happening in the institutional and derivatives space closely. Watch this space, the future is here, now.