- Pure Digital plans to offer cash cryptocurrency trading for investors through their existing bank relationships
- State Street is lending its foreign exchange technology to Pure Digital
On Thursday State Street introduced a company called Pure Digital to the world, to whom it would lend its foreign exchange technology for an interbank digital assets trading venue to launch this summer.
Campbell Adams, co-founder and head of markets for Pure Digital, and a veteran FX trader, founded the company three years ago as a digital currency initiative that will eventually span stablecoins and central bank digital currencies as well as cryptocurrencies like bitcoin. He told Blockworks the robust infrastructure of the foreign exchange market will bring the maturity that’s still missing in digital assets.
“It’s an exciting new world and we’re going to be the vehicle for you to do this the right way,” Adams said. “We’ll build the foundations for doing all the elements correctly, for engaging with the next generation of every single element from custody all the way through to market data and everything in between.”
The company plans to provide a high throughput OTC market for digital assets with physical delivery and bank custody. It’s in discussions with several other “top tier” banks, CEO Lauren Kiley told Blockworks, collaborating on what they need in place to meet client demand and how the market works. It will follow the foreign exchange prime brokerage model, whereby banks extend credit to their clients and set them up to trade behind their bank’s name.
“The big flaw of the crypto market is that it’s impossible for the real money — the asset managers pension funds,” Adams said. “You’ve got a fiduciary duty to trade in certain ways on certain exchanges in certain environments and they can’t do that currently. This offering will be regulated, and have only regulated participants and full transparency and full openness, with regard to regulation. They will be able to access the market they want to get into.”
Cryptocurrency trading is retail driven and fragmented, he said. In an OTC market, participants can control their credit, increase or decrease in the live environment, and extend relatives — they’re ultimately in control of their trading.
By contrast, on an exchange, where most cryptocurrency trading currently happens, traders don’t know with whom they’re trading, which could put them in a situation where they trade with jurisdictions they’re not allowed to, Adams added.
“There’s a lot of experience, knowledge and robustness that the FX ecosystem can bring to the physical world,” he said. “Because we are transparent in the matching logic that we use, the integrity of the market will be very high.”
State Street is familiar with the Pure Digital business model. It was a founding partner in ParFX, Adams’ previous foreign exchange platform, a consortium of banks that did the first live production trade with Deutsche Bank in 2013.
Similarly, Pure Digital is building its OTC market with a consortium of banks that will act as liquidity providers, custodians and clearers.
Adams and Kiley said they expect it will make digital assets more accessible to a different set of end users, making Pure Digital both complementary to financial incumbents and competitive with others.
“It feels like the next, and maybe even final, stage in the evolution of the crypto market in terms of full mainstream adoption,” Kiley said.