Riot Blockchain Plans to Launch Regulated Crypto Exchange
Riot Blockchain, a former biotech firm that redirected to Bitcoin mining, is planning to launch a cryptocurrency exchange in the US by the end of the second quarter of this year, as shown in a company filing with the Securities and Exchange Commission (SEC) on March 14, 2019.
A Fully-Regulated Exchange
The Colorado-based firm joined forces with software company Synapse Financial Technologies (SynapseFI) and has invested $250,000 in the new project. After the launch, the exchange’s budget is anticipated to grow to about $2 million. The platform will be operated by RiotX Holdings, a subsidiary founded by Riot Blockchain with the sole purpose of managing the exchange.
According to the filing document, SynapseFI will contribute to Riot’s banking services with an Application Programming Interface (API) that would link their accounts to US-accredited banking firms. Also, the API will monitor customers’ IDs and locations to avoid fraud and inappropriate use of the exchange. The filing reads:
SynapseFi’s API will enable to Company to know where the user is when accessing RiotX, thereby enabling the Company to prevent a user from Montana, a state where the exchange of digital currencies is permitted, from traveling to neighboring Wyoming, where the exchange of digital currencies is not permitted, and using RiotX in the prohibited jurisdiction.
The new subsidiary will build three primary services – trading, banking, and a digital wallet – all of which are essential for a crypto exchange. By the end of 2019, the platform is expected to be available in all 50 US states except Wyoming and Hawaii. However, this goal is quite bold, and Riot Blockchain admits that it might miss this deadline because of regulatory issues and capital restrictions. Also, the parent company acknowledged that the investment in RiotX was not exempt from risks.
If the Company is unsuccessful in the deployment of RiotX, it may lose most or all of the capital it has invested into the exchange.
The filing says.
Despite everything, Riot Blockchain has big hopes that the launch of the exchange in 48 states by the end of the year is doable. The company said that RiotX had already secured approval for its exchange in five states and had current applications in 17 other states.
The Biotech Firm Turned Blockchain
Riot Blockchain started as a biotech firm called Bioptix. It rebranded in 2017 and introduced the term blockchain in its brand-name, which immediately sent stock price higher. Because of this, the company got a subpoena from the SEC and even risked to be delisted from the NASDAQ exchange. Riot was open to cooperate with the regulator and operate in line with the rules. Thus, it made significant changes to its management, restructuring the board of directors.
Meanwhile, Riot has proven its intent to turn into a blockchain-oriented firm and that the recent rebranding wasn’t just a marketing move. In November 2017, the company agreed to buy 1,200 crypto miners from Bitmain, the largest mining equipment maker in the world. Thus, the company started to focus on mining cryptocurrency and departed from its biotech business.
The first time when Riot announced its intention to develop a crypto exchange was about a year ago, in March 2018. A filing with the SEC showed that Riot planned to look into launching a digital currency exchange and a futures brokerage platform. In parallel, the company purchased Logical Brokerage, a Miami-based futures broker registered with the Commodities and Futures Trading Commission (CFTC) and the National Futures Association.
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