Innovating From Cryptocurrency to Equities Trading
Objective
Enable a crypto trading platform to offer a seamless customer experience between crypto and equities trading by offering registered broker-dealer services.
Background
Uphold, a well-regarded traditional and crypto trading app, had already attracted millions of users worldwide with its crypto trading experience and user-friendly approach. But the company had a bigger, more ambitious vision, which “embraces a future where people and businesses around the world have access to safe, transparent, fair and affordable financial services.”
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Challenges
While equities are a core element of investing and trading, purchasing them with cryptocurrencies creates significant regulatory complexities and adaptations to special middle- and back-office requirements.
Uphold wanted to make it simple to use the value stored in their crypto wallets to purchase fractional shares of publicly traded companies.
InnReg's Solution
Helped guide Uphold through the regulatory requirements around acquiring a broker-dealer to settle fractional buy- and sell- trades that initially originated from an end-user’s crypto wallet.
Advised on moving the acquired broker-dealer from a fully-disclosed to an omnibus structure so that it could manage trades within one, proprietary set of digital books and records in the broker's name.
Provided essential input on obtaining regulatory approval from FINRA to provide these new services and persisted with the process through several rounds of inquiry.
Designed the strategy for Uphold to mitigate risks and quickly build a compliance program to meet all regulatory requirements for its new broker-dealer business model and operations.
Client Results
On March 31, 2021, Uphold announced that it received regulatory approval to purchase JNK Securities, a U.S. broker-dealer, making it one of the first cryptocurrency firms to own a broker-dealer approved to offer equities.
News of the approval made big waves in industry press covering cryptocurrency, fintech, and regulation, as well as lifting Uphold’s search traffic by roughly 1,000%.
The ability to offer equities to U.S. investors will drive new account openings and trading volumes to greater heights of success, giving Uphold customers greater wealth-creation opportunities.
