How Market Making Will Help You Gain Traction For Your Token

 

Are you planning to launch an IEO Project? Beware! Or you will get stuck in the liquidity trap. Sometimes you might get so engrossed in all the different core aspects of an IEOlike team, product, and marketing that you may forget about liquidity. Maintaining liquidity is a very important part of your project. Without this, your IEO project will come to a halt.

As we all know, IEO projects lack liquidity. Unlike capital markets, you have to use various tools to generate liquidity for your token in the market. It is created with the help of “Market Makers.” If you are new to the whole market making process, we can help you.

This post is for all those people who want to increase liquidity and traction for their token. In this post, we are going to show you how market making will help you gain traction for your token. Before we begin, let’s learn about market makers and their importance.

Market Makers

When your IEO ship is stuck, market makers act as the Knight in shining armor to save it from sinking. The market has two sides. We only look at one side of the market, which includes investors, traders, etc. They are called market takers. They are also known as liquidity takers.

You know how important they are for the success of your project. But, in order to take liquidity, there should be liquidity present. Here is where our heroes, market makers, come into the picture. They make-up the other side of the market. They are liquidity makers. For your IEO project to gain momentum, both sides should work in sync. We have always discussed the importance of market takers, but today we are going to discuss about the importance of market makers.

Market Making

It is a process where liquidity is provided to both the buyers and sellers by the trader. Let’s see what liquidity is and how it is created. Liquidity is where you can quickly buy and sell the tokens without affecting the price. Market makers make use of spread. They will quote a price to sellers as well as buyers of the token to maintain spread. The selling price in known as the Bid price and the buying price is known as to ask price—the difference between these two prices is known as the spread. When the spread is small or tight, liquidity increases. They earn a profit on the price variation.

Example

Bid price = $100; Middle price = $102.5 Ask price = $105. Spread = $5. The middle or actual price of the token is $1.2.5. Now the market makers will buy the token from the seller at bid price = $100. They will sell the same token to another investor for ask price = $105. Market makers will make a $5 profit. With this tight spread, they will increase the volume of token trading and maintain liquidity.

Liquidity Trap Explained

Smaller IEOs and tokens often face this issue. When your project lacks market makers, you may fall into this trap. You have listed with a good exchange, you have an excellent marketing strategy, your project is nicely planed, but without liquidity, investors will not buy your tokens. You want investors to buy your tokens, but investors need a liquid market.

• IEO issuers: You will face problems while listing your token on exchanges. They will need market makers assurance. If not, they will charge higher fees.
• Exchanges: They will face problems while listing your project due to a lack of market. They have to spend their money on time on due diligence.
• Investors: Without market makers, there will be wider spreads for your token. Investors are averse. In such an illiquid market, a small change can lead to higher losses like a pump and dump.

Market makers are the glue that holds all these three parties together. They provide the needed assurance and undertake risks to ensure market liquidity.

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The Most Important STO Regulations Included in the SEC

 

Unlike all ICOs, Security Token Offerings should be registered with the Securities and Exchange Commission (SEC). If you are planning to invest in an STO, you will get some rights to the firm or organization that issued the token just like shareholders. So, this makes them similar to shares.

The registration process included in the SEC is part of what makes STOs a safer option for shareholders or issuers. Since investors also get more security, fraudulent companies are warded off. That is why many companies are likely to hire the most trusted STO platform that provides technical as well as a legal support structure for securities issuance, including KYC, AML compliances, setting up of tokens and development services. The registration process of STOs is quite similar to the registration procedure of IPOs (Initial Public Offerings).

SEC has foreseen and made a number of legal acts to regulate several kinds of securities and their offerings or sales. They are known as regulations or rules. They facilitate you to manage offers of securities on different conditions, which currently covers an extensive range of possible requirements and differ in conditions.

These regulations include Reg A+, RegCF, Reg D, and Reg S. STOs are counted amongst those regulated token offerings that are registered with the SEC (Securities and Exchange Commission) or use many available securities exemption like Reg A+ to do it.

Such regulations are explained in the following section. Let’s get started.

Regulation CF

Regulation CF is created for holding crowdfunding campaigns that is why it is also known as Regulation Crowdfunding. It enables eligible organizations to sell or offer securities via crowdfunding. According to the rules of Regulation CF, all transactions are required under regulation crowdfunding to take place online via an SEC-registered intermediary, either a funding portal or a broker-dealer portal. 

• Under this regulation, any company or firm can raise a maximum aggregate amount of $1, 07,000 via crowdfunding offerings in 12 months duration.  
• An issuer also should not aggregate amounts being sold in other non-crowdfunding offerings during the preceding period of 12 months for the purpose of determining the amount sold in a specific Regulation Crowdfunding offering.
• The amount that a company or an individual can invest is limited. 

1. 1. 1. If the annual income or net worth of an investor is less than $107,000, then the limit for investment is greater of $2,200 or 5% of the lesser of annual income or net worth of the investor. 
      2. If their annual salary as well as net worth both are equal or more than $107,000, then investment limit would be 10% of the lesser of their annual salary or net worth.
      3. During the time duration of 12 months, the aggregate amount of securities that are being sold to an investor via all Regulation CF offerings may not exceed the amount of $107, 000, regardless of the net worth or annual salary of the investors. 

• Companies that are registered with the USA can only apply for getting started with STO via Regulation CF. Investors should also be the citizens of the US. Companies that are Exchange Act Reporting Companies are not eligible to use the Regulation CF offerings.

Form C

Any issue who is conducting a Regulation CF offering should fill its offering statement on Form C online via the Commission’s EDGAR system, and any intermediary allowing CF offering. The cover page of this form will be created when an issuer provides details in XML-based fillable text boxes on the EDGAR (Electronic Data Gathering, Analysis, and Retrieval) system. The disclosures that are requesting the text boxes can be filled as attachments to Form C. This form also does not need any specific presentation format for the attachments. Nonetheless, Form C includes an optional Q/A format for issuers’ usage to provide the disclosures that are required but not included in the XML textbox section.

Form C also consists of many other variants. All of them are discussed in the following section:

1. Form C – contains the original offering statement 
2. Form C/A – covers amendments to a previously filled Form C
3. Form C-AR – filled by issuers for providing required annual reports
4. Form C-U – filled by issuers at the end of the CF offering to disclose the total amount of securities that are being sold
5. Form C-AR/A – used for amendments to form C-AR that is previously filled
6. Form C-TR – used for issuers who are likely to terminate their reporting

Registration Rules for Intermediaries

• An intermediary person in a transaction including the sales of securities for someone else should register with the SEC as a funding portal or broker. Regulation CF generates simplified registration steps for funding portals. However, non-US funding portals are not allowed to register themselves in the SEC. 

• An intermediary should also register with a self-regulatory organization or SRO.

Filling Review Process

The filling review process is established with the purpose to monitor and upgrade compliance with the applicable accounting and disclosure prerequisites. In this process, The Division of Corporation Finance focuses its resources on the most important disclosures that can not obey the rules of Commission or conflict with relevant accounting standards and on disclosure that are appeared to be lacking in clarity or explanation.

The division assigns fillings by several firms in a specific domain to one of seven offices and conducts its primary review duties via these offices, whose members are experienced and specialized in industry, accounting, and disclosure reviews.

To safeguard the efficiency and integrity of the selective review process, The Division of Corporation Finance does not reveal the main procedure used to recognize companies or filling for review publically.

Regulation A

Initially created as Regulation A, some people began to call it Regulation A+ or Reg A+, which often created some confusion. However, its official name remained to be Reg A. This regulation is majorly suitable for just US or Canada-based companies that were not formerly SEC-registered. This Exemption applies to those public offerings of securities that do not exceed the funding amount of $50 million in any 1 year period.

It is easier because there are no such restricted laws for potential investors (except for the citizens of the US). This process of registration is not extremely difficult, but more overwhelming than other options available; it requires the approval of the SEC before the beginning of fees.

The issuer under this offering should give buyers documentation with the issue, likewise to the prospectus of a registered offering. 

Amongst the benefits offered by this exemption are more simplified financial statements without any audit obligation, three achievable format options to use in order to organize the offering circular, and no necessity to provide Exchange Act reports until the firm holds more than 500 shareholders and $10 million in assets. 

According to the updates that were done in 2015, companies are now allowed to generate income under 2 tiers. Most importantly, investors should now invest in buying securities being sold by several companies using this exemption to know what tier the offering is being provided under. Every company should indicate the tier its offering is carried out under on the front of its offering circular or disclosure document. 

The Difference between Regulation A Tier 1 and Regulation A Tier 2 

According to Regulation A Tier 1, any company or firm is allowed to offer a maximum amount of $20 million in any 1 year period. The issuer should also provide an offering circular. This circular should be filed with the SEC. An offering circular is also subject to a vetting procedure by the securities regulators and commission in the individual states valid for the offering.

If your company is issuing under tier 1, there is a requirement of generating reports frequently. Also, you do not need to issue the report mentioning the final status of offerings.

If you are issuing offerings under tier 2, things would be different. You can offer up to $50 million in any 1 year period under tier 2 but not under tier 1.

The offering circular does not have to qualify by any state securities regulators. However, it is needed and is subject to the vetting and review process by the SEC. Moreover, the companies that are offering securities under Tier 2 should provide frequent reports on the offering and its final status.

SEC Form 1-A is filling with SEC (Securities and Exchange Commission) by entities looking for an exemption for registration prerequisites for specific public offerings under Regulation A.

Regulation A Disclosure Forms:

Form 1-A

This form is an offering statement that involves an offering circular and other offering disclosures. 

Form 1-Z

This form is an exit report that contains the information of the end or completion of an offering. Companies conducting Regulation A tier 2 can instead disclose this on the Form 1-K. 

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Server-Less Architecture for Crypto Exchange Platform

 

Do you know how a crypto exchange platform is made available to all? It is done with the help of hosting services. After you develop your exchange platform, you need to host it so that the traders can access and it by using the internet.

In recent years many people have started showing interest in cryptocurrencies. Because of this, the demand for exchange platforms has subsequently increased. With the growing popularity, people are demanding exchange platforms that are user-friendly and easy to access.

To do this, you need to choose the right hosting services. Exchange infrastructure plays a very crucial role in traders, exchange providers, and investors. To gain new traders and institutional investors, you need a robust exchange hosting architecture.

Earlier, there were only traditional cloud computing options available to maintain the exchange infrastructure, but you can now use different options. One of the most used options is server-less architecture. White Label Crypto Exchange Software functions on server-less architecture.

This post will discuss different types of cloud hosting infrastructure and show you why server-less architecture is mostly preferred for exchange platforms.

Importance of Crypto Exchange Infrastructure

An exchange platform cannot functions without a secure infrastructure. It includes all the. It is the set of technology that helps the trader to buy and sell crypto on the platform. 

If the infrastructure is weak, it will severely affect the trade performance. The number of transactions is severely affected by the infrastructure. No matter how secure the infrastructure is, a reasonable price crash can severely impact it. 

With a reliable infrastructure, exchanges can efficiently process multiple transactions at the same time. Weak infrastructure leads to glitches and slow operation. All the different types of problems you face while using the exchange platform like downtime, crash, or network issues result from infrastructure issues.

By using a server-less infrastructure for your exchange platform, you can easily manage all the problems. It will not affect your trade count or volume. Traders can experience smooth transactions without any glitch or difficulties.

Cloud Hosting

It is a type of web hosting. As we have discussed above, your exchange platform needs to be hosted to make it accessible online. Here different servers are used instead of one. Because of this, the load gets balanced, and there is no downtime. Multiple servers are used to host your exchange platform so that even if one server fails, others will help to balance the load. 

The cloud hosting architecture is different from regular web hosting architecture. In proper web hosting, only one server is used to host your platform, but multiple servers are used in cloud hosting. It helps to avoid exchange downtime and cluster problems.

Types of Cloud Hosting Infrastructure

Here are the different types of cloud hosting infrastructure to host an exchange platform.

Infrastructure as a Service (IaaS): You don’t have to buy your own servers when you can use the IaaS cloud computing service. Most of the exchange platforms use this service. They use Azure to manage their infrastructure while they can focus on other aspects of the exchange platform. It can be used for testing and development, website hosting, storage, backup, host web apps, etc.

• Platform as a Service (PaaS):

It offers all the services provided by IaaS, along with other development and deployment services. It helps to support all the development aspects of an exchange platform. Along with infrastructure, you can avail additional benefits like development tools and managing operating systems.

• Software as a Service (SaaS):

With this service, you can enjoy all the benefits of IaaS and PaaS, along with using your own cloud-based apps on the net. Exchanges can use this service to connect their own cloud-based app online. It is a complete solution. Large scale exchange platforms can use this service.

• Server-Less Architecture:

When you use server-less architecture, you don’t have to worry about managing the infrastructure at all. You can concentrate on developing your exchange platform while the provider will manage the entire infrastructure. 

Most of the exchange platform uses AWS to manage their infrastructure. You don’t have to maintain the exchange servers, storage, database, or application. You can focus on developing your exchange platform instead of managing all the operations. All the time and energy can be focused on developing a high-tech exchange platform without worrying about infrastructure hosting. 

You can use different types of server-less cloud services like AWS Lambda, Adobe, Google Cloud, Gateway, and Azure, to manage the infrastructure. Enterprise Crypto Exchange Development Company uses server-less architecture to develop an exchange platform.

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Know About the Best Regions for Legal Crypto Business

 

Well, we have already discussed legal crypto compliance and taxation outlook in our previous articles. In this article, to conclude, we will be discussing the best regions for legal crypto business across the globe.

Let’s get started!

Establishing a business in the best countries that can welcome it with open arms can be overwhelming. Especially, when you are talking about setting up centralized crypto exchanges or white label Cryptocurrency exchange platform, it is important to place the best region. Since the governments around the world are now aware of cryptocurrencies, their legal compliance and taxation guidelines, you have to think twice before launching any crypto startup. The government can either crackdown on your company or allow it to flourish in the crypto ecosystem approved by the government’s laws. 

However, there are some jurisdictions that emerged as being a lot better than others for individuals who want to launch a crypto startup. 

In countries like India or China, you would find yourself stuck in a situation if you are dealing with Cryptocurrency. Reason – In India, Reverse Bank announced in 2018, it would not provide services to any individual who is in the business of cryptocurrencies. In China, all domestic authorities banned ICOs and local crypto exchanges in September 2017.

Therefore, if you are planning to launch a crypto startup, it is important for you to study the regulatory framework as well as the government policy in a number of jurisdictions. You should also know about the current taxation outlook, a number of fintech companies that would support your business in the region you are considering to set up a business. In this article, we will be sharing some of the best regions that are worthy of consideration before you settle your crypto startup. Please take a look!

USA

Undoubtedly, the USA is counted amongst the hotbeds for crypto companies. In this country, you can find renowned and successful crypto exchanges, wallet developers, and crypto miners. The government of the USA has enacted straight-forward legal compliance for crypto businesses or companies. However, crypto regulations and policies vary from state to state and a few taxation guidelines are being unclear in the USA.

In 2019, lawmakers filed a bill to generate tax exemption for specific Cryptocurrency transactions. All-in-all, the crypto community in this country is still booming and the technology is managing to enter the mainstream. For instance, in 2018, Ohio allowed companies to pay a variety of tax with bitcoin, including tobacco sales tax and employee withholding tax.

Japan

Invariably, Japan is being able to have some amazingly progressive Cryptocurrency regulations across the world. Consequently, around 10% of the total worldwide traffic to Cryptocurrency exchanges comes from Japan. Amazed?

In 2017, Japan has recognized crypto assets as a legal tender and launched straight-forward tax guidelines for aspired investors. This was the big deal since launching detailed guidance by the national tax authority of any region on virtual assets has been a noteworthy concern for businesses as well as individuals.

The crypto industry in Japan has also been given the leverage to self-govern in a way that is adaptive and accommodating. The Japanese Virtual Currency Exchange Association includes more than twenty organizations having collective authority to enforce and pass regulations for crypto exchanges in Japan.

Switzerland

Switzerland is also counted amongst the best nations that have been in favor of the Cryptocurrency business. In this region, many crypto startups have been encouraged to get settled there and in 2019, Switzerland declared a new legislative approach to Blockchain.

Generally, Switzerland managed to provide a low-tax ecosystem for businesses and bitcoin startups that are already based in Switzerland. Tax regulators of this country consider cryptocurrencies to be assets, subject to wealth taxes that should be announced in annual returns.

Zug is a canton in Switzerland, popular by the name of ‘Crypto Valley’ after it issued various progressive laws regulating the usage of Cryptocurrency and related businesses.

According to a report in 2018, it was declared that the top 50 blockchain and cryptocurrencies based companies in this country’s Crypto Valley alone to be worth $44 billion. The state railway even accepts BTC for payments of tickets. Swiss Banks like Julius Baer also permit direct transfer and deposits of select cryptocurrencies.

Vancouver

In Canada, Bitcoin has a solid community. Canada has also taken some serious regulatory steps to embrace the virtual currency. Vancouver is home to QuadrigaCX – a defunct crypto exchange that lost C$180 in customer funds after its founder’s alleged death.

More than 2 dozens merchants in this region can accept bitcoin. Residents of Vancouver can purchase Bitcoin at nearly 40 ATMs. Waves Coffee House is the world’s first Bitcoin ATM that was begun on 29, October 2003, in downtown Vancouver. This city is home to more than 631,000 citizens.

Singapore

Tech-savvy Singapore also counted in the best countries to support Cryptocurrency businesses. This region is just another jurisdiction that is worth considering if you are planning to launch centralized crypto exchanges startups. Before 2019, the regulatory framework for Cryptocurrency was not that clear and some businesses were not able to expand due to multiple issues with their bank accounts. Currently, Singapore’s financial regulator is open to crypto companies that are working with banks to reach an agreement to permit businesses to expand. In 2018, the Central bank of Singapore had finalized a new regulatory framework for payment-related services, which currently include Cryptocurrency.

Singapore is a huge tech and business community that is ideal for several investors and aspired crypto startups.

Malta

Malta is a small European Island Nation whose parliament has taken an unquestionably pro-Bitcoin stance, with the Prime Minister calling crypto the inevitable future of money. Parliament of this region passed 3 bills offering a framework for Blockchain technology in July 2018.

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