Coinfloor, London’s only Bitcoin exchange which was established in 2013, has today announced a raft of new features, including its “proof of solvency”, making it the world’s first publicly auditable Bitcoin exchange. Additionally, the exchange announced 0% fees for the first 60 days of trading and an “over the counter” (OTC) trading system for large bitcoin trades.
Coinfloor issued a press release today citing how the failure of other Bitcoin exchanges have highlighted the fact that Bitcoin, while being decentralised and inherently secure, incurs different kinds of risk than other currencies. Because Bitcoin is peer to peer, using an exchange introduces a third party into a transaction, and that party must be able to prove its trustworthiness by opening themselves to scrutiny. With that in mind, Coinfloor says it is s the world’s first fully KYC/AML compliant exchange; “even in advance of regulatory compliance requirements and oversight”.
To that end, Coinfloor has announced itself as the world’s first publically auditable Bitcoin exchange. This literally means that any individual may audit the company’s records and compare them to Bitcoin’s public ledger – the block chain. This means that clients can make sure the business is holding the full reserve of funds it should be, and in turn that their own investments are safe. Having said that, users should be reminded not to use exchanges as a de facto bank.
While Coinfloor is the first exchange to be publically auditable, the process of independent auditing, by means of the block chain, is not a new idea. US based exchange Kraken recently documented a procedure whereby it could be cryptographically audited. Indeed, this was recently carried out by Stefan Thomas (CTO of Ripple Labs), making Kraken to be the first exchange to be independently audited. However, in this case, Thomas had to actually physically visit the Kraken offices to do so.
With the so-called “OTC Market”, Coinfloor hopes to provide platform for large financial institutions to make large bitcoin trades. In this effort, Coinfloor reports that it has partnered with an FCA-regulated (but not named) trading firm to act as a “market maker”. The reason behind this move is that Coinfloor believes the Bitcoin market needs “meaningful liquidity” to reach more people.
Coinfloor told us:
“Coinfloor believes that liquidity and trust are the biggest hurdles bitcoin faces right now and this is what we are doing to solve them. We also see the state of bitcoin’s liquidity as a market opportunity and one in which the financial community can bring valuable contributions”
“We strongly believe that introducing the financial community to Bitcoin is an important stepping stone in the success of the currency. In speaking to a number of equities exchanges, we found the appetite for new products remarkably positive. Brokers, proprietary traders and the rest of the financial community are curious and excited about the opportunities that Bitcoin presents.”