Since launching in 2018, LMAX Digital, LMAX Group’s institutional spot crypto currency exchange, has been at the forefront of institutional adoption of crypto currencies and the evolution of the digital assets ecosystem. Jenna Wright, Managing Director, identifies some of the current opportunities and challenges within the ecosystem, and outlines how LMAX Digital provides a level playing field for institutional market participants…
How would you describe the current state of play when it comes to adoption of digital assets, particularly among institutional investors?
While the adoption of digital assets is still nascent from an institutional investor perspective, predominantly dominated by proprietary trading funds and hedge funds, it is an exciting time to be in the space. We are starting to see some bullish moves, like spot bitcoin ETFs, from some of the world’s largest asset managers and banks planning to enter the market in a more meaningful way. This, combined with some positive developments that we are starting to see on the regulatory front, is encouraging.
While some black swan events have set institutional adoption back, we are seeing some progress, and view digital assets as ultimately becoming integrated into the existing fabric of traditional financial markets. Since we launched LMAX Digital in 2018, we have been clear on our long-term view: that blockchain technology and digital assets will pervade traditional capital markets. As the tokenisation of real-world assets continues to gather pace, we will see more innovation and efficiency within capital markets in the years ahead, but that evolution is going to take time.
What are the primary barriers to further acceptance and investment in digital assets and how can these be overcome? Which part of the supply chain can lead the charge here?
The lack of a credit mechanism and intermediation within the institutional markets, for banks to offer their clients crypto trading credit, remains a challenge. This has been further compounded by the US banking crisis earlier this year, with fiat on- and off-ramps and banking rails tightened even more so. The underlying market structure needs to be more robust and of institutional grade, services need to be unbundled, and we need to see improved standards of risk management and governance across the entire ecosystem to reassure investors.
Additionally, we need to see appropriate regulation in major markets, with enforcement elements to weed out bad actors. Any regulation should also be balanced, so that innovation can be fostered, creating greater stability in the market rather than a framework that stifles development of this emerging asset class.
We believe there is a role for all participants in the ecosystem – regulators, banks, exchanges, asset managers, hedge funds, investors – to collaborate.
How is the regulatory environment in the UK supporting growth in the digital assets space? What more can be done to improve this?
Compared to its financial competitors, including the US, the UK is currently in a unique position with its blend of regulatory talent, an innovative financial sector, and supportive policymakers, which has meant that it has a less fragmented regulatory landscape.
Regulation takes time, but the progress we have seen so far in the UK is encouraging, with policymakers working in collaboration with industry to ensure that the frameworks they identify are robust, effective, and will be under the supervision of respected regulatory bodies.
Sandboxes should continue to serve as an effective testing ground, while constant dialogue between regulators and industry participants, along with some political oversight, will also be key. There is a lot more work to be done as the market evolves but regulating the activities that surround the asset class is a prudent first step.
As more managers look to enter the crypto and digital assets space, how is LMAX Group helping these managers access these assets and encouraging their progress?
Since launch, LMAX Digital has been the fastest growing exchange within LMAX Group with over $1tn of crypto currencies traded, 190 million trades completed, and 750 global institutional investors onboarded to date.
Our institutional-grade infrastructure with ultra-low latency, accurate price discovery, consistent execution, and access to deep institutional liquidity, enables institutional investors, including hedge funds and managers, to access and take advantage of opportunities in the cryptocurrency space.
Jenna Wright, Managing Director, LMAX Digital – Jenna Wright is the Managing Director of LMAX Digital, part of LMAX Group, and has recently been named as one of the Twenty Most Influential Women in Crypto 2023 by Financial News, and top 25 Women Leaders in Financial Technology of Europe by The Financial Technology Report. Jenna has been instrumental in driving growth of LMAX Digital and building it into the leading institutional spot crypto currency exchange globally. Jenna joined LMAX Group in January 2009 and has held multiple senior managerial roles at LMAX Group, including Head of Broker Operations and Head of Client Services. Prior to LMAX Group, Jenna worked at Cantor and UBS. Jenna holds BA in Economics & Politics from the University of Manchester.
