Leading American cryptocurrency exchange Bittrex has announced partnership with a regulated alternative trading system (ATS) firm called Rialto Trading, which currently offers fixed-income products for traders. Once approved by the regulators, the joint venture aims to offer a new, innovative digital securities trading platform and blockchain-based digital securities.
Rialto has expertise in operating a licensed broker-dealer ATS while Bittrex’s has experience in blockchain technology, digital currency trading, wallets and cybersecurity. Leveraging the complementary expertise the two companies bring in to the joint venture, they will work together on providing a wide range of services to the entire digital asset securities ecosystem, which will include issuance of advisory services, placement, trading and custody. The new ATS of Rialto is also expected to support the U.S. dollar (USD) trading of digital securities. The joint venture will also enable access to a larger market for Rialto's clients and will remain accessible to institutional investors, corporations, America-registered broker-dealers and qualified investors who meet the rules for annual income of at least $200,000 or a net worth topping $1 million, according to Reuters.
Though the partnering companies claim to have had detailed discussions with the regulators, there is no tentative timeline specified for securing the necessary approval.
Tightening Regulations, Intensifying Competition
The strategic move by Bittrex is seen as a countermeasure to competitor Coinbase’s recent attempt to get registered as a regulated broker-dealer. In June, Coinbase applied to the U.S. Securities and Exchange Commission (SEC) for the necessary registration and is in the process of seeking a broker-dealer license, an alternative trading system license and a registered investment advisor license. If successful, it will gain eligibility to offer blockchain-based securities. (See also: Why Coinbase Bought a Broker-Dealer.)
The move also becomes necessary as the SEC has started imposing the necessary rules for operations of exchanges and initial coin offerings (ICO). New tokens, often launched through an ICO, require adherence to securities regulations that imply that they need to be traded on registered venues.
"We're merging Bittrex's technology, cybersecurity and blockchain expertise with Rialto's deep knowledge of the securities industry,” said Bittrex CEO Bill Shihara.
Shari Noonan, Rialto Trading's CEO, said, "By working together, we'll be able to expand our current client offerings to not only include digital securities, but also provide them access to a globally advanced and reliable trading platform."
Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns no cryptocurrencies.