trade.io, a U.S.-based blockchain-development company, is applying for licenses from Hong Kong’s Securities and Futures Commission in order to transform itself from a pure crypto business into an Asia-oriented investment bank.
The aim is to operate in both the decentralized and the traditional, fiat-money based industry, says Will Corkin, vice president for business development. The firm hopes to leverage Hong Kong’s equity-trading culture and regulatory environment, which offers clarity toward ICOs without the severity of the U.S., to establish a crypto venue that not only attracts liquidity but enables broader financial services.
That is evident in the firm’s recently announced tie-up with another New York-based startup, DarcMatter, which operates a peer-to-peer marketplace for alternative investments. A seed venture arm of trade.io pledged $2 million in DarcMatter’s upcoming ICO.
Sang Lee, CEO at DarcMatter, said, “We have the same goal as t-io: to use technology to change traditional financial services.”
There and back again
For trade.io, the journey originated in that traditional world, is now full-blown crypto, but will settle with a foot in both camps – if its strategy pans out. The company’s origins are as a foreign exchange broker, Primus, which provides swaps to retail investors. That remains an ongoing business.
The company completed an ICO in January 2018, raising $31 million for its TIO coin. It is using the proceeds to build out a crypto trading desk and ICO consultant into a full-blown exchange, which the firm plans to launch in July. It will be based in Hong Kong for the purpose of trading utility coins (those deemed not to be securities by the SFC).
The Hong Kong office opened just in February, headed by Corkin and John Patrick Mullin, managing director for research and business development. Its security-token activities will be conducted in the U.S.
Institutional money is the way bigger play
Both Americans had been working in China’s fintech space, Corkin at Fintech Connector, a Shanghai-based fintech community builder; Mullin at Guotai Junan Securities as a fintech analyst.
But the longer-term vision is to get licensed by the SFC to deal and advise in securities, and manage assets.
From startup to banker
“Post-IPO, we could either get regulated to attract institutional assets, or we could become a decentralized crypto exchange,” Corkin told DigFin. “Institutional money is the way bigger play.”
Mullin says the firm’s goal is to serve as a bridge between financial institutions and blockchain companies, using its experience advising tech companies on their ICOs as a springboard.
The ambition is to work initially with tech companies that look to public equity markets as well as digital coins for fund raising, but help them access fiat capital through crowdfunding techniques on the trade.io platform, rather than a traditional roadshow-based, book-building process.
This fiat-money vision is still two years away, but Corkin and Mullin say they are laying the groundwork to become a new kind of investment banker, and putting the firm in a position to leverage Hong Kong’s equity culture to become an Morgan Stanley-cum-Charles Schwab to small and mid-sized businesses – and perhaps to larger financial institutions, too.
Pulling in traditional capital
“We’re seeing companies like DarcMatter creating services that plug into the back ends of institutional investors,” Mullin said. “They have asset-management relationships who can use our pool of liquidity to add value – liquidity that today is provided by banks.”
For all of this to happen, trade.io needs to get its exchange launched, its SFC licenses granted, and then to attract enough liquidity from crypto investors for its trading venue to matter. It’s also competing with other blockchain startups, from more established exchanges in Hong Kong such as ANX to newly minted behemoths such as Block.one, which raised an astonishing $4 billion ICO on June 2 – a feat that will enable it to suck up the top talent.
In the meantime, trade.io is making its TIO coin as attractive as possible to boost activity on its network. It has just announced an “airdrop”, in which TIO holders have the opportunity to get free tokens from partners, including DarcMatter’s upcoming coin.
We have the same goal: to change traditional financial services
(The process involves connecting with both trade.io and with token givers such as DarcMatter over the Telegram messaging app; the more TIO coins held, the more partner tokens you can receive.)
The benefit to the likes of DarcMatter? It connects limited partners (institutional investors and asset owners) with general partners (hedge funds and private-equity shops). Its clientele want access to crypto assets. They’re being held back by regulatory concerns, worries over custody, and other technicalities.
But DarcMatter’s Lee says demand is keen, and that by teaming up with trade.io, he offers these big, traditional players a trusted avenue, once the regulatory position in the U.S. becomes a little more forgiving.
Then, gradually, he wants to use DarcMatter’s coin to move distribution of alternative investments to LPs – with all of its operations, reporting and paperwork – onto a decentralized ledger, automating everything.
“The relationship with trade.io is more than just dealmaking,” Lee said. “We have the same audience, but we provide for different needs.”
For trade.io’s Hong Kong team, the vision is to give traditional pools of capital crypto access, while advising tech players so they can raise capital – whether via an ICO or a technologist’s version of an IPO.
Said Corkin: “We’re the bridge between the old and the new.”