Quoine Liquid — Crypto Exchange Update
If you are laser focused on building a crypto exchange business, supported by 350 employees across six locations, your service offering better improves continuously, as Seth Melamed, Head of Business Development & Sales at Quoine, operator of the Liquid platform, remarked to me yesterday. So we sheepishly admit to neglecting our friends since reporting on the freshly released ICO Mission Control platform last summer, and set out to share what the team has been working on.
To recap, Quoine operates two crypto exchanges, originally established as Qryptos, a crypto/crypto exchange in Singapore, and Quoine, a fiat/crypto exchange in Tokyo. The company raised a USD 18m seed round in 2016 from SBI Investment, Mistletoe, JAFCO, B Dash Ventures, Digital Garage, and ULS Group. Quoine became part of the first batch of exchanges officially licensed by the Japan FSA in September 2017, and the company raised USD 105m through a token sale in November 2017. Both platforms were unified under the common Liquid brand and infrastructure in September 2018.
Since Quoine operates across two jurisdictions with different regulations, some of the services developed are not (yet) available in Japan, e.g. the leverage allowed for margin trading has been recently restricted to a maximum of 4x by the Japan Virtual Currency Exchange Association (JVCEA), the Self-Regulatory Organization (SRO) responsible for the crypto exchange industry.
Since the listing process is also different, Liquid Japan offers 50 trading pairs, while Liquid Singapore offers 173. For the BTC/JPY pair, Liquid is dominant with a 71% market share. Liquid used Multi-Party Computation (MPC) to ensure crypto withdrawals within ~10 minutes while maintaining all client assets in cold wallets. They seem positive that the processing time can be reduced to under 5 minutes in the near future. Deposits are currently recorded with a one block confirmation time, which will be reduced to zero blocks or six seconds in April for BTC, and during the second half of the year for ETH.
Liquid now also provides a lending service, which seems on par (or even better, since you do not need to leave the exchange platform) with other standalone services such as Celsius Network. As with all of these offerings, one needs to carefully evaluate the counterparty and credit risk involved.
In addition to the exchange platform, Quoine has also launched an OTC trading desk for institutional traders and investors looking to transact from USD 100k to USD 10m in order size for all major cryptocurrencies, with the settlement effected via custodians and escrow.
Liquid Infinity provides trading through Contracts-for-Difference (CFDs) with leverage up to 100x, based on the overall trade position.
With the trading interface more geared towards the frequent or professional traders, Quoine has also been making amends to develop a faster and more intuitive user experience for the casual trader, which looks a lot like what Coinbase provides, and allows the execution of orders through a couple of easy clicks. This also goes hand-in-hand with a much improved mobile app, as well as a social media component called “Liquid Vision”.
Quoine takes security and compliance extremely seriously. In fact, you can go back to CEO Mike Kayamori’s presentation at the Tokyo FinTech Meetup in October 2017 (prior to the Quoine token sale) to see how much he has always emphasized being compliant and above the law as the key factor for long-term success and survival in this industry. It is baked into the Quoine culture. With this, Quoine is obviously setting a high bar. Their staff numbers roughly align with what is anecdotally known about Coincheck, which had about 70–80 employees at the time of the exchange hack in January 2018, and Monex Group reportedly hired or seconded another 200 people to satisfy FSA demands. There still seem to be applicants for an exchange license in the pipeline who believe they can successfully register with just a few people on the ground — of course, it is a market, and we will see how it all pans out. Watch this space!
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