Vedder Thinking | News Vedder Price Advises on Start-Up of First UK-Regulated Bitcoin Trading Platform
Digital Securities Exchange (DSX) today became the first company in the UK to bring bitcoin trading into a secure regulated environment. DSX is setting a market precedent by running all bitcoin transactions through FCA-regulated ePayments Systems (ePayments).
Mr. Richard L. Thomas, a London-based Partner in the Finance & Transactions group at law firm Vedder Price, has advised ePayments founder Mr. Mike Rymanov since the company's establishment in 2011. The ePayments model is simple, with members opening an e-money account to receive electronic payments, from which they can upload credits to a pre-paid Mastercard. In 2014, the company obtained FCA-regulated status under the Electronic Money Regulations 2011.
Mr. Rymanov's latest innovation was to establish a bitcoin trading platform through DSX, which is registered as an agent of ePayments. A condition of trading on the platform is membership in ePayments, which requires traders to comply with comprehensive customer due diligence procedures and AML checks. Furthermore, all traders’ funds are kept in segregated, ring-fenced e-money accounts.
Mr. Thomas brought in Mr. Sam Tyfield, another Partner in Vedder Price's London office, to advise DSX on the establishment of its electronic crossing network, or trading platform. Mr. Tyfield regularly works with clients involved in providing electronic trading platforms and crossing networks for spot FX and regulated FX products. He also works with firms that trade electronically, as well as their service providers. Drawing on his broad experience in the area, Mr. Tyfield was able to apply to the DSX structure his knowledge of the commercial application of technology in the trading environment and the crossover of that technology with regulation, the day-to-day operation of a platform’s systems and platform users’ demands.
The benefits of bitcoin over traditional forms of payment include lower transaction fees, absence of chargebacks and no intermediaries. However, bitcoin is mostly unregulated and consequently viewed with distrust by businesses, politicians, financial institutions and regulators around the globe. DSX has chosen an innovative approach by forcing digital currency trading into the regulated environment.
"DSX is a natural stepping-stone towards creating a true hybrid e-money/digital currency trading and payments platform," said Mr. Rymanov. "Based on a tried and tested regulatory regime, yet embracing new technology, DSX is set to change the world—one bitcoin at a time."