🤷 Opinions Katya Michaels

Institutional Investment in Crypto: Interview with LGO Markets’ Hugo Renaudin

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Crypto exchanges have to combine technological innovation with regulatory compliance to attract institutional investors
Institutional Investment in Crypto: Interview with LGO Markets’ Hugo Renaudin

As the cryptocurrency market expanded dramatically in the past year, institutional investment has become the elusive white whale of the crypto space, potentially capable of transforming the entire industry. However, a number of conditions have to be met before that becomes possible – namely, a clear regulatory framework and platforms that take steps to comply with those regulations.

The Legolas exchange, founded in France and based in New York, is launching a specialized platform for institutional investment, LGO Markets. The new platform aims to combine aspects of traditional financial exchanges with security innovations that Blockchain technology can provide. CryptoComes spoke with Hugo Renaudin, CEO of LGO Markets, about the prospects and implications of institutional investment in the cryptocurrency market.

Crypto regulations and attitudes in France

Katya Michaels: Different countries are in very different places right now in terms of cryptocurrency regulations. Where does France fit on a scale between a crypto-friendly environment like Malta on one end, and the US on the other?

Hugo Renaudin: I would say France sits in the middle. The framework for ICOs is pretty smart now – there is a license that you get. If you are a startup and you don’t have that license, you are forced to communicate that to the buyer.

What’s difficult when you have a crypto business is to have a bank that supports your operations and allows you to sell cryptocurrency to fund your account. For various reasons, a lot of banks are a bit cautious about that, and the regulator which is regulating the banks is not the same as the regulator that’s regulating the ICOs. Everyone is not on the same level, but still I think the regulating bodies are pretty open to innovation in this space.

KM: In terms of the general attitude from the government, the academia and the entrepreneurial community, is there a lot of enthusiasm for cryptocurrency in France?

HR: The government is definitely business friendly, but France is not a country with the highest adoption rate when it comes to technology. Even though we have a lot of entrepreneurs, French people tend to be a bit cautious. A lot of people are definitely looking at it.

We have a high level of scientific culture in France, a high scientific awareness. People look at projects in a very technical way and there is a lot of criticism for those that raise a lot of money while not being at the proper technical level.

However, the French community is enthusiastic about entrepreneurship in general, and the cryptocurrency and Blockchain space in particular.

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KM: What is most different or most surprising for you in the US fintech system as compared to France?

HR: The first thing is the scale of the American financial system is so much bigger than the French one. Something that’s not surprising, but different in the US, is the strength of the SEC. The AMF (l’Autorité des Marchés Financiers) is by no means as strong as the American regulator. The SEC is super powerful and it’s super important to be very compliant with them.

There are more different types of actors here – small businesses and financial companies, more small firms, small brokers, small banks. There’s a multiplicity of actors in the financial world in New York – less of that in France, just because the market is smaller.

Another thing is that traditionally the financial industry in the US is more open to adopting new technologies such as cryptocurrency. The financial markets for Bitcoin are likely to happen first in the US and only then in France.

Specifics of institutional investment

KM: You’ve said that LGO Markets is a next generation crypto exchange – what does that mean? What does it introduce that hasn’t been done before?

HR: We are not reinventing the wheel here. If you look at the cryptocurrency exchange ecosystem, it’s done in a very strange way. The architectures of a cryptocurrency exchange and a traditional exchange, like the NASDAQ or New York Stock Exchange, are very different.

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Crypto exchanges like GeminiCoinbaseKraken, and Bitfinex have millions of users, millions of direct connections. This means a huge risk in terms of security, huge problems in terms of KYC and AML, and in terms of custody it makes it impossible to segregate the funds.

These exchanges have all the funds aggregated in one big bank account that belongs to the exchange.

Effectively, cryptocurrency exchanges are not only exchanges, but also custodians. This doesn’t make any sense from a traditional financial perspective.

Exchanges should not handle the custody risk on behalf of their clients, and clients should not trust exchanges to hold their funds.

When you look at how the NASDAQ stock exchange is structured, they have a lot fewer clients, maybe hundreds or thousands, not millions. These clients are all institutional – brokers, market makers, funds. They are all regulated. They have their own clients as well, but there are very few direct connections to the exchange.

Because of that there is less security and KYC/AML risk. You can open what’s called a brokerage account, which belongs to the client and allows them to trade on the exchange. That’s the setup in the traditional exchange space. Exchanges are not custodians in the stock and equity world.

We take this architecture, which exists in the traditional financial markets, and we apply it to the cryptocurrency asset class.

As I said, we are not reinventing the wheel, we are just taking the same old model that works very well in the equity world and applying it to the cryptocurrency space.

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The architecture is not an innovation per se, but the way we handle custody is. We do not store cryptocurrency for our client. Instead, we designed a client wallet that can be thought of as a brokerage wallet. If you hold Bitcoins in your personal wallet, you can send those to the brokerage wallet and use them to trade.

In terms of technology, it’s a two out of three multi-signature wallet. That means there are three keys that exist, and you need two of these keys to initiate transactions. That itself is unusual and something that exists on our exchange only. In terms of custody, we are the only exchange that allows our client to hold their Bitcoin.

Another innovation is on the price discovery. When we built LGO, there was a lot of media coverage about cryptocurrency exchanges manipulating the price. Many people believed that they had been front-run by exchanges, that the price had been manipulated and that they lost money because of it.

We use Blockchain technology to actually prove that we do not manipulate the market. We get orders from our clients, send those orders to a Blockchain, wait for it to be validated, retrieve it, feed it into our system and then we trade.

Our clients can check that their order has not been erased, has not been front-run, has not been manipulated. We guarantee the transparency of the price on our exchange.

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Evolution of cryptocurrency exchanges

KM: Many crypto exchanges are striving to become part of the established financial system However, as they become institutionalized, do you think that crypto exchanges as a form will still have a rationale to exist?

HR: It’s a very interesting question. We see cryptocurrencies as a financial asset and we treat them as securities in our operations. It’s all about processes and technology. I think that cryptocurrency exchanges that exist right now don’t have the architecture which is fit for the institutional world. Those will likely disappear or stay at the retail level. That’s not to say that crypto exchanges which are geared toward the institutional investor, like ours, will disappear.

Holding cryptocurrencies is not the same as holding securities – there are technological issues which can be a barrier to entry for traditional stock exchanges. You have to marry both worlds.

KM: What are some of the specific features that institutional investors are looking for in a crypto exchange as opposed to retail?

HR: First of all regulation, so that institutional investors can trust the exchange. The second thing is custody. As an institutional investor, you are managing your clients’ money and you are required to prove that you are managing the risk of how you store money. This custody aspect, the way the funds are stored, is super important for institutional investors. Price transparency is essential as well, because you need to show your clients that you are giving the best price.

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KM: What are the implications of institutional investment for the market?

HR:

Institutional investment will tremendously increase the market capitalization of the whole asset class with additional inflows. It’s going to change the volatility because there will be less panic trading.

With professional trading, there is strategy and it is more rational. So, I also think that all the bad assets, the bad coins, those that have no rationale behind them, those that are scams  – will get sorted out eventually.

The future of crypto investment: lessons learned

KM: Some ICOs like Tezos, though backed by real technology, can face post-ICO issues with internal conflicts. Do you think this is a typical conflict that we are likely to see a lot?

HR: I think the Tezos conflict is not going to happen again. First of all, the setup of the ICO with the Swiss foundation was crazy. You don’t need to do that anymore – you can do an ICO in France, or in other countries. In terms of the structure of the ICOs and the legal context, it’s getting more rationalized now, although it doesn’t solve the issue of governance in the crypto space.

You have to think of it as Internet 1996-97.

The industry is not where it can be yet. There have been a lot of bad projects, there will be a lot of bad projects. The question is what we learn from the mistakes.

With Tezos we learned that the setup was absolutely crazy and a tech company doesn’t need that much money.

These are healthy problems because in a way they allow you to cure the whole ecosystem Those are mistakes that will never be made again.

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KM: Given what you’re working on, you must believe that clarifying regulation and compliance is a necessary step forward for the cryptocurrency space. In general, what conditions in a country ensure that it can stay on the forefront of innovation?

HR: The most important thing is to give a clear definition of what cryptocurrency is and create a regulatory framework. It’s very difficult for institutional investors to buy Bitcoin or any other cryptocurrency for this simple reason – they don’t know in which regulatory “box” it belongs.

It’s about being smart – allowing new actors and favoring them to enter the market, punishing bad actors, helping good actors to build their product and ease their regulatory burden. There is a lot of value to be made in the space, in terms of jobs, in terms of wealth creation for individuals and society as a whole.

It’s tough because sometimes regulators don’t fully grasp the whole technological aspect. They often stop at the fact that it was used on the dark web, used for money laundering.

KM: Sometimes it’s difficult from the other side as well, because in the crypto community there is a feeling that it was created to be regulation free.

HR: Sure, but if you want Bitcoin to have an economic reality, you need to be pragmatic about it and you need to somehow let the regulators find a good framework. Because if Bitcoin is only going to be used on the dark web and things like that, it will never be a reality. If you want Bitcoin to be widely used, then you need to validate it with countries and legal authorities.

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EOS Price Expected to Keep Rising After Doubling in Value Since December Lows

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EOS is one coin that has shrugged off its lows to double in value since December, with more growth expected
EOS Price Expected to Keep Rising After Doubling in Value Since December Lows

In the current climate, there is optimism returning to the market with Bitcoin pushing the $4,000 mark. However, a lot of this positivity has come from an altcoin rush of late. Coins such as Tron, Ethereum, Ripple and Stellar have played their part in boosting the market, but one particular coin has been striving since its lows in December last year.

EOS, a cryptocurrency that is currently ranked fourth by market cap, has quietly been going about its business, growing not only in price but also value as a blockchain company. It is showing some medium to long term bullish tendencies, outperforming many others.

The coin reached a low of $1.54 on December 7th, 2018, but at the moment, it is heading beyond the $4 mark, having doubled in value since that late last year low. It currently sits at $3.38.

Many are expecting the coin to keep growing, with its highest point touching $4.05. This move represents a 161% gain in only 74 trading days. If the bullish tendencies can continue across the markets, there is no doubt that EOS will cash in.

EOS Charts

More to come

EOS is seen as a rival to Ethereum, and because its intention is to improve upon the original smart contract blockchain, it will feel it has an edge in terms of adoption in the coming months.

It is a double-edged sword, as added adoption of the blockchain platform will help increase its reputation, which in turn will boost its price. Then, because EOS’ price is already starting to grow substantially, it will bring the platform to the fore for future blockchain applications.

If EOS can continue to offer a good blockchain service and the market keeps positive, there is every reason to believe that the coin’s price will continue to grow — and also outperform many of its rivals and other altcoins.

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Ripple XRP Price Prediction: Major Financial Services Group Sees XRP Exceeding Bitcoin’s Market Cap

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The president of SBI Holdings in Japan believes that Ripple will dominate global expansion and soon have a bigger market cap than Bitcoin
Ripple XRP Price Prediction: Major Financial Services Group Sees XRP Exceeding Bitcoin’s Market Cap

The SBI Group, a Japan-based financial services giant as well as a keen partner with Ripple for their bank settlement cryptocurrency, are bullish on the XRP token overtaking the current head of the market cap standings, Bitcoin.

The President and Representative Director of SBI Holdings, Yoshitaka Kitao, has come out and said XRP is dominating international expansion and will become global in the future. This global domination, based on XRP’s propensity to partner with major financial institutions across the globe, means Kitao sees it overtaking Bitcoin.

Bitcoin has stood at the head of the market cap standings in relation to cryptocurrency ever since it was invented some 10 years ago. Other coins have come close to knocking it off, but the decentralised coin has stood firm. But, if Kitao is right, XRP could overtake the market cap with a huge growth in price from global adoption.

International adoption

Ripple’s XRP token is as a cryptocurrency global and borderless, just as Bitcoin, because of its decentralised nature. However, Ripple has been looking to run XRP like a business with its xRapid product.

Thus, its growth is based on its adoption by financial institutions around the globe, and as this adoption grows, the worth and interest in XRP will increase, and thus its market cap will begin to rise.

“Because XRP is already beginning to become international, xRapid will be used for fund transfers in 2019. By increasing the so-called XRP’s plastic use, we anticipate that the [Ripple] market capitalization will easily exceed the market capitalization of Bitcoin,” Kiato said.

Ripple has already shown its power in growth as opposed to other major cryptocurrencies, often stealing second spot from Ethereum in the recent past. Ethereum was once a coin that was almost overtaking Bitcoin, but it is now under threat by a much more compliant and potential-full XRP token.

Better use cases

Because Ripple is trying to build XRP’s use cases for financial institutions, it has an advantage over other tokens in that it will be useful rather than just a cryptocurrency experiment. It is highly believed that once crypto finds its killer application, the price of it will skyrocket as people flock in demand.

If XRP does become more globally adopted, there will be an influx of interest in the coin and thus its price will shoot up, allowing it to overtake Bitcoin’s market cap in no time.

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EOS Price Jumps 25% as Market Flattens Out: Is There More to Come?

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The cryptocurrency market’s best performer in the last 24 hours has been EOS as the rest of the growth plateaus – what’s next?
EOS Price Jumps 25% as Market Flattens Out: Is There More to Come?

Ever since last week Friday, where there were small indications that a rally could happen, the cryptocurrency market has shown some good growth, with Bitcoin, the head of the market, topping off at just under $4,000.

What has been typical of this small rally has been the effect of some of the major altcoins in pushing the cryptocurrency market. It began with the likes of Binance Coin, Stellar and Tron, and then saw Ethereum take over, but now EOS has shown a huge 25% growth spike in the last 24 hours.

It would seem that this rally has flattened out for the moment, with a lot of the coins levelling out. It is now important to see what comes next as another rally following this levelling could be massive for the medium to long term growth of the entire market.

EOS Drive

The now-fourth biggest cryptocurrency based on market cap has advanced nearly 25 percent in the last day to reach $3.47 and is currently neck-and-neck with Litecoin, whose own value has also ballooned 11 percent since year-end 2018.

Today’s gains reflect support from the EOS community and could have something to do with Block.one, the creator of EOS, recently providing greater clarity on the roadmap.

Block.one CEO Brendan Blumer addressed some of the community concerns on social media, reminding them in a message entitled “Great Things Take Time” that there is more ahead than meets the eye.

Of course what is important to note in regards to this kind of reaction is that these altcoin projects are putting out positive news, and that is having an effect not only on the coin, but the market in general.

There is positive news being met with results which are driving the market, and this has not been seen for a long period. The bullish market tendencies being seen could be indicative of a change in the sentiment.

What next?

It is still early to call, and quite tentative, but it certainly feels like a bull run could be developing. It may be based off the altcoin news and sentiment, but Bitcoin will play a important role. The major cryptocurrency came $30 short of cracking the $4,000 mark.

If Bitcoin is able to breach that resistance, even if it is through the drive of another altcoin, it could open up a whole new level of potential gains across the market and could possibly start a new bull run.

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Altcoin Price Prediction [UPDATE]: XRP, ETH, BCH Ride Tron, Stellar, and Binance Coin’s Wave to Rally the Market

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After showing signs of a rally late last week, a number of altcoins have pushed the market into a substantial rally this Monday.
Altcoin Price Prediction [UPDATE]: XRP, ETH, BCH Ride Tron, Stellar, and Binance Coin’s Wave to Rally the Market

There were indications in the market at the end of last week that a rally was building, built off the back of a few altcoins, as reported by U.Today. This held true as the total market capitalisation of the cryptocurrency market went from $119 billion to $126 billion.

On Friday, there were small spikes starting to show from Binance Coin, Stellar and Tron, and those movements seem to have sparked enough positivity in the market to kickstart the rest of the coins into positive growth.

The likes of Ethereum, Bitcoin Cash, and Ripple are leading the way now, with Bitcoin also doing well. However, this rally does not seem to be predicated on Bitcoin’s growth and could be indicative of an altcoin season growing, should the rally continue.

Positive for XRP, ETH, BCH

Monday has now seen positive growth for the entire top 20 coins by market capitalisation. Ethereum is leading the lot with an 11 percent growth rate since Sunday, but it is also good news for Bitcoin Cash with seven percent gains, and Ripple with three.

Bitcoin itself has grown by three percent as well since Sunday, this after trading nearly perfectly flat for the past seven days. The rally being driven by a combination of altcoins is indeed positive for the general market as it shows a break in the dominance of the major cryptocurrency and a divergence.

Many of the major coins have all spiked at the same time, but there are some who are plotting their own path, and are still benefiting from the general good feeling across the market.

Flattening out

The likes of Tron, which led the rally last week, is seeing a flattening out after its early spike, but still has managed to pick up some green numbers.

The same goes for Binance Coin and for Stellar, although a look at their graphs does show a smaller spike at the same time as the rest of the market spiked early on Monday.

Up or down from here?

The movement up from a small spike is clearly a good sign for the market, as is the $7 billion that has been added to the market cap, but the next movement through this week will be key in determining if this is just a bull trap or the beginning of something big.

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Ripple in Trouble: Will JP Morgan Coin Affect the Price Prediction of XRP?

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In a surprising move, bank JP Morgan has announced a cryptocurrency that sounds a lot like what Ripple is trying to do with XRP
Ripple in Trouble: Will JP Morgan Coin Affect the Price Prediction of XRP?

After being in the news for all the right reasons recently — from donating to blockchain studies at universities and making key banking partnerships — Ripple and its XRP token are suddenly under fire by Wall Street bank JP Morgan.

The bank, whose CEO once famously slated Bitcoin, has seemingly changed its tact with the announcement of its own stable cryptocurrency, the JPM Coin. This new cryptocurrency has been used in just one trial transaction, but many are already hailing it as a game changer for digital assets.

JP Morgan Chase’s plans for its clients to use JPM Coin in cross-border payments is a direct threat to one of the most regulated and in-line blockchain companies: Ripple and their XRP token.

A slap in the face

There has been ongoing rumblings about dissatisfaction with the current method of international payments, SWIFT. For this reason, Ripple has been taking aim at replacing the outdated system. However, it seems like they are not the only ones with JP Morgan now coming to the fire with their own version.

Ripple has been working hard, but at their core, they are a startup that is now in competition with a major Wall Street bank which has a lot of sway and brand recognition in the financial sector.

“This is a huge slap in the face for Ripple,’’ said Tom Shaughnessy, principal at Delphi Digital, a crypto research boutique in New York. “Ripple’s target market is cross-border payments and remittances and now JPMorgan’s effort is a direct threat.’’

Not bothered

With that being said, Ripple and its CEO Brad Garlinghouse, as well as the price of the XRIP token, have barely taken note of this big announcement.

The price of the XRP token has remained quite steady since the announcement, trading sideways for most of the week. Additionally, Garlinghouse tweeted after the news broke:

As predicted, banks are changing their tune on crypto,” Garlinghouse wrote in a Tweet. “But this JPM project misses the point – introducing a closed network today is like launching AOL after Netscape’s IPO. 2 years later, and bank coins still aren’t the answer.”

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