Archax is pioneering a new era of digital asset trading

The team at Archax believe that the financial world is on the cusp of a revolution thanks to what distributed ledger technology can unlock – and they’re ready to help their clients capitalize on it. What started as a passing interest in DLT’s by its founders, Archax has grown into one of the most innovative financial services organizations in the world today, with the promise to fundamentally reshape how institutional investors interact with digital assets.

How did Archax get here?

Archax was founded in 2018 by Graham Rodford, Matthew Pollard and Andrew Flatt, all with decades of experience in senior leadership roles with regulated financial institutions. They were watching first-hand how Bitcoin was disrupting the financial landscape. It was the technology that powers crypto that really caught their attention, and they realized that DLTs could offer much more than just cryptocurrencies and that this technology has the potential to power every financial asset in the future. But for institutional investors, the path to embracing this new technology was viewed as highly risky due to a number of factors including regulatory uncertainty, transparency and security, and a lack of standard infrastructure to support any DLT or web3 initiatives. Archax was launched with the goal of bridging the gap between the innovative potential they saw in DLTs to streamline processes, enhance security, and broaden access to a new class of financial products for their clients.

Why Archax is the answer for institutional investors

As mentioned, the challenges standing in the way of Archax were centered around regulatory concerns, transparency and security, and lack of infrastructure. Let’s look at how Archax has solved these.

From a regulatory perspective, the lack of clear and consistent regulations around digital assets created several concerns for institutional investors. One major issue was the inconsistency of regulations across different jurisdictions. For example, some countries have adopted a wait-and-see approach with regulation, while others are actively developing frameworks. This inconsistency makes it difficult for institutions with a global reach to feel at ease due to the risk of non-compliance. Understanding and complying with a patchwork of regulations across various markets is a significant undertaking, requiring substantial legal and compliance resources. Archax has leaned on their expertise working in heavily regulated financial institutions to solve this challenge. Notably, through Mr. Rodford’s previous role as chief compliance officer for a UK based hedge fund. Thanks to this, Archax is the first firm globally to achieve regulatory approval from the Financial Conduct Authority (FCA) as a digital securities exchange, custodian, and brokerage. This recognition was a crucial step forward for Archax to become a trusted leader in the digital asset space for institutional participation.

Per Graham, “We built Archax to be a trusted and credible partner in digital for institutional investors. We got regulated in 2020 and became a digital securities exchange custodian and broker and were the UK's first crypto asset registration as well. In fact, we're still the only UK digital securities custodian broker exchange”

Archax's expertise in navigating the complexities of digital asset regulations allows them to guide institutions through the compliance process. They are able to help investors understand regulations, interpret them for their clients, and implement the necessary controls to ensure compliance. This removes a significant barrier to entry for those seeking to participate in the digital asset market.

This dedication to compliance carries over to how Archax solves any concerns related to transparency and security. Archax tackles these challenges by promoting a culture of transparency and prioritizing security. Their platform, being certified and regulated, fosters trust with their clients by adhering to stringent compliance guidelines, such as ensuring adherence to anti-money laundering (AML) and know-your-customer (KYC) protocols. This commitment to transparency provides investors with confidence in the legitimacy of the assets traded on the platform. Additionally, Archax is able to prioritize security not only through the best practices their team has developed from their years of experience in heavily regulated financial organizations, but by taking advantage of the security features and protocols that are built into the DLT that is the foundation of their platform, in this case the Hedera network. Hedera’s consensus mechanism is asynchronous Byzantine Fault Tolerant (aBFT). This means the timing and order of transactions on the network are guaranteed to be fair and secure, which completely prevents any manipulation. Additionally, the network employs cryptographic tools like digital signatures and hash functions to safeguard data integrity and further prevent tampering. These features, along with Hedera's focus on enterprise-grade security, allow Archax to ensure the highest level of protection for their client’s sensitive financial transactions.

Finally, from an infrastructure perspective, Archax has solved the issues that have prevented institutional investors considering digital assets. Traditional finance is dependent on infrastructure that is simply not equipped to take advantage of web3 technologies and struggles to seamlessly integrate digital assets. This incompatibility creates friction for institutions that want to participate in these. Archax provides an infrastructure that is designed for the unique needs of digital assets. Their platform integrates seamlessly with existing systems, enabling efficient clearing, settlement, and custody of digital assets. This streamlines the process for institutions, eliminating delays and frustrations associated with legacy technology. By creating a turn-key answer to the infrastructure challenge, Archax is paving the way for smoother adoption of digital assets within the mainstream financial system.

What Archax makes available to investors?

Archax has been able to develop themselves into a one-stop shop for institutional investors that are looking to enter the digital asset market acting as a digital securities exchange, custodian, and broker.

As a fully regulated digital securities exchange, institutions can trade a variety of digital assets, including security tokens representing traditional assets like stocks and bonds, alongside cryptocurrencies, on the platform. This eliminates both the complexity as well as the counterparty risk associated with retail, peer-to-peer exchanges that have often kept many institutional investors on the sidelines.

Also, since Archax is a qualified custodian. This means that they can securely hold all digital assets traded on their platform, including cryptocurrencies, tokenized securities, and even traditional fiat currency. This custodial service provides a vital layer of security and peace of mind for institutional investors, allowing them to focus on making informed investment decisions.

Archax’s brokerage services streamline the entire investment process in digital assets for institutions. As a broker, they act as intermediaries, facilitating the buying and selling of digital assets on their exchange. This expertise ensures efficient execution of trades while adhering to regulatory requirements, saving institutions valuable time and resources. By combining these functionalities, Archax empowers institutional investors to confidently navigate the burgeoning digital asset market.

“We are excited with all the services that we can offer thanks to our professional experience and how we’ve been able to make Archax what it needs to serve our clients best. If you imagine a Venn diagram of securities and crypto, we can do everything in securities, everything in crypto, and where they cross over, digital securities, that's our sweet spot”, says Graham.

Why Hedera?

We’ve already provided some detail into why Archax partnered with Hedera thanks to the security aspects of their network. Additionally, Archax takes advantage of the Hedera Token Service (HTS). HTS is used to create tokenized representations of traditional financial instruments like stocks, bonds, and other real-world assets on the Hedera network. One of the benefits of this is that it allows Archax to support fractional ownership of assets, potentially increasing liquidity and accessibility for institutional investors. Tokenization through HTS also streamlines the trading, clearing, and settlement processes of digital assets by leveraging the inherent speed and security of the Hedera network.

Archax also integrates with Hedera to offer staking services for HBAR. Staking allows institutional holders of HBAR holders to earn rewards by contributing to the security and stability of the network. Another benefit of the Hedera network is that it is designed for scalability, ensuring it can handle the potential growth of tokenized assets and staking activity on the Archax platform.

From a compliance perspective, the Hedera's governing council, which is composed of highly reputable institutions that include other financial as well as legal entities, is laser focused on regulatory compliance, which aligns very well with Archax's commitment to a regulated digital asset environment.

What’s next for Archax?

The future of Archax is all about growth. Archax is continuing to expand their significant customer base of institutional investors, expanding significantly through the end of this year. Archax already has 63 funds available to investors, and they are expected to onboard at least another 20 in the next 12 months.

Expanding the staking opportunities that they can offer their clients is also a priority. They will be looking to offer new opportunities for staking cryptocurrencies beyond HBAR. Doing this will let Archax can cater to a broader range of investor interests and potentially generate additional revenue streams.

Additionally, the team expects to develop deeper integrations with existing financial systems to facilitate smoother interactions and encourage wider adoption of digital assets by institutional investors.

As Archax continues to bridge the gap between traditional finance and the digital asset market, the future of institutional investing is incredibly exciting.

With a commitment to regulatory compliance, web3 technology, and a focus on transparency and security, Archax is poised to innovate finance and unlock massive opportunities for institutional investors worldwide.