We’ve been thinking for some time about the right medium to communicate the happenings at INX Limited to our INX Token holders and greater INX Community. After consultation with the rest of the Management Team, it was decided that a monthly newsletter would be an excellent way to discuss where we have come from and where we are going. You may think that little has changed at INX since the IPO, but that thought would be far from reality. We expect these monthly missives will help keep us all better informed – not just about the present, but also of our vision for the future.
At the time of the IPO, INX had perhaps 15 employees. Today we have 90. Like many companies in this space we have been aggressive in hiring for roles that cover customer service, business development, product, developers, legal and operations. These hirings have occurred in multiple countries across time zones. Our hiring is aggressive and continuous.
As you already know, there are currently 25 US states or districts able to trade on the INX Digital (cryptocurrency) platform. This platform currently lists the major cryptocurrency pairs, in addition to the GMO Trust stablecoins GYEN and ZUSD… more on these later. As you may be aware, we recently hired as Deputy General Counsel the former Virtual Currency Chief at the New York Department of Financial Services (NYDFS) where he was responsible for new applicants for the BitLicense and supervisory oversight of BitLicensees. The team is working diligently to add more currencies to the platform. Obviously we do not want to list anything that may be perceived as a security by regulators on the INX Digital platform and so we use prudent care. Whilst it may appear that other platforms may take a weekend to decide what to list. We are not other platforms.
A few weeks ago, Gary Gensler, Chairman of the SEC, discussed both utility tokens and stablecoins in Washington. He noted that many utility tokens currently listed on cryptocurrency exchanges may in fact be securities. This will obviously be a problem for these exchanges, some of whom appear to be setting aside significant warchests to prepare for future legal action. Mr. Gensler also alluded that he sees any stablecoin that is backed by money market funds to also be a security. This could certainly affect how USDC and other stablecoins are used in the future. Interestingly, both GYEN and ZUSD are backed solely by fiat currencies, 1:1. We expect this will be a benefit to their adoption in the future.
We have finalized construction of our maker and taker API for INX Digital, and if you are looking to connect to us in this fashion I urge you to check this out. In addition, we have commenced work on a mobile native app for cryptocurrency trading, and we expect to release this in Q1 2022.
Moving to INX Securities, our digital securities trading platform, there are a number of enhancements and business lines in the works. Most folks concentrate on the trading platform, the ease with which trades are settled, and the User Interface. To this we would reiterate that what you see today is in no way the finished product. We are working diligently to create a one-platform approach where you’ll be able to access both INX Digital and INX Securities with one central user login and unified single onboarding process . Once granted access to the platforms, we anticipate that the user experience will be much smoother for those who are able to use both trading platforms. This requires a significant work effort from teams of designers, developers, product specialists and users. The flow has to be just right. And it will be. But patience is needed.
In the short term we have strengthened the core systems behind the digital securities business so it can better handle volume and throughput, so that the majority of trades match on the blockchain and funds are delivered more seamlessly. The prior system was not designed for heavy volumes, and it has required significant discussions with banking partners and our developers to identify workflow inconsistencies and fixes. Certainly the user interface has not changed, but the machine behind the face has been significantly overhauled. We see little use in significantly changing how it looks, when a grand overhaul is on the horizon. In launching the securities trading platform this summer, our main goal was to give INX Token holders liquidity as soon as possible 24/7/365 after the IPO. We achieved that goal.
We think it is important to remember that our trading and settlement process differs from our competitors and we are happy to explain why. Our orders and trades occur on the blockchain. Every single one. Users keep their digital securities in their own Metamask wallets, and these sync with our platform. Buyers have their dollars held in a 3rd party bank, and once there is a match, the funds flow from one user to another, and from one wallet to the other. This is a carefully choreographed routine that requires levels of KYC/AML, the whitelisting of Metamask wallets, the cooperation of the blockchain, the seller having the balance of digital securities in their wallet that they have left an order for, and the buyer having properly funded their bank account to buy those digital securities.
There is currently no custody at INX. We never hold your digital securities. We believe this is the future. In a few years, you will have a wallet on your phone. In it, you will hold NFTs of your drivers license, your passport, your vaccination certificate and your diploma. You will also hold your cash in various stablecoins, and naturally you will hold your securities.
For many new investors, the term ‘custody’ is either unknown or feared. Unknown because traders on Robinhood likely never think about it. Feared because of the repercussions that custody can bring in equity markets. The Reddit/Gamestop discussion brought this up quite well. When an investor holds his/her stocks at a brokerage house, that brokerage house is able to ‘re-hypothecate’ or loan out those securities to hedge funds and other actors who want to short those same securities. The brokerage makes a fee from this action, and yet it hurts the investor!
A digital security held in your own metamask wallet is not able to be subject to shorting from other actors. By taking control of your securities, you are taking control of so much more. It is our sincere belief that digital securities will soon be at the point where they are unstealable, and unlosable, at which point why would anyone worry about custody anymore?
The ERC-1404 smart contract that we use for the INX Token has many built in features. If you lose your wallet, we can revoke the digital securities from the lost wallet and reissue them to a new wallet. If someone was to hack your wallet and try to take your ERC-1404 securities, an additional line of defense kicks in. The securities in your wallet will look to the blockchain and make sure that the wallet they are being sent to is also whitelisted. If it is not, then the securities will refuse to move! If it is whitelisted then we know exactly who the owner is. Now there is still a risk of theft, but it is mitigated significantly.
On the business development side we have been working on a number of projects. Some like IPEX and the Entoro NFT partnerships have already been announced and these should bear fruit in the future. Others, relating to primary capital raises and secondary listings have yet to be announced for a number of reasons, but we expect to release information over the next few months. We have been making leaps and strides here, meeting constantly with issuers to curate and introduce a number of very interesting opportunities to the entire INX Community.
On the payments side we have added the ability to send BTC and USDC, along with ETH and USD for conversion to USD to fund a user’s INX Securities account. We acknowledge that it is neither fast nor efficient, and we have discussed this with the community, and assure you that we have a solution on its way that will enable real-time capital transfers 24/7/365, in line with the operation of our ATS. It is important for us to resume the option to make payments through ACH and this should be implemented in the coming weeks. The immediate next update will be to allow SWIFT withdrawals for Non-US customers.
Note that our ATS is available in every US State, and the INX Token is open to investment from retail, institutions and accredited investors without limitation other than the obvious KYC/AML standards; and while we opened the platform to a limited number of countries, and required passports, we have since added many more countries and added country specific ID’s to many countries’ residents. We want securities on our platform to be available 24/7/365 to as many as possible, and will continue the work to add available countries. Now that we have opened things up a little more, we have made the Price/Volume API available to the public for wallets and exchanges to display the INX Token. Incorrect volume and price information had previously been showing up in too many places. We are delighted to share this information as it shows our strategy of never sleeping works!
As for our purchase of ILS Brokers, we recently hired a Global Head of OTC Cryptocurrency Derivatives. He is now talking to all relevant banking, futures and swaps institutions about integrating our API for spot cryptocurrencies, and regarding the trading of Non Deliverable Forwards (NDFs) in BTC and ETH. While these products are not yet in production, the feedback we are receiving is very positive and we are happy to chat with anyone in our community that may be in a position to further conversations!
Over the next few weeks you will see opportunities to spread the INX word to your friends and family.
As always, we will PR information as it comes available. Buckle up!