This afternoon I saw that EBC issued an announcement because a company was providing cryptocurrency transactions under the name of EBC.
1. EBC: Not involved in cryptocurrency in the past, present, and future
Strangely enough, in recent years, some fake cryptocurrency platforms have always been targeting some high-quality trading platforms that do not engage in cryptocurrency.
The reason is simple. This type of platform has good regulatory qualifications. For example, EBC has licenses from the UK FCA, Australian ASIC and Cayman CIMA, while cryptocurrency platforms lack similar regulatory mechanisms.
Therefore, by impersonating their names, these encrypted platforms actually increase their own credit endorsement. For other platform users who are unaware of the truth, they may unknowingly fall into the trap.
Therefore, this time EBC was tough enough and directly stated in the statement that it would never provide any transactions related to blockchain and cryptocurrency.
Why do I say EBC is strong?
Because EBC directly draws a line between itself and cryptocurrency transactions, anyone who has read this announcement will know that any news related to EBC and blockchain at any time in the future is fake. For traders, the cost of counterfeit detection is greatly reduced.
But for EBC, this means that EBC will not explore the cryptocurrency market. So, between user security and profitability, EBC chose the former. From a profit-seeking perspective, EBC is indeed too rigid.
2. There may be other considerations for not getting involved in cryptocurrency
1. Difficulty of supervision and safety
Due to its decentralized nature, cryptocurrency is difficult to be directly supervised by regulatory agencies. In addition, the fact that cryptocurrency is traded anonymously further increases the difficulty of supervision.
Therefore, top-level regulators are usually cautious about cryptocurrency businesses. Even in the UK, which has an open attitude, its regulator, the FCA, is quite strict.
To give you an intuitive example, the FCA only added the MLR license for digital currency trading in 2020, which is separate from other trading services. I personally feel that the FCA is still in the exploratory stage in the field of cryptocurrency. So far, I have not heard of a platform that has both MLR and 4 categories and 7 types of licenses.
There are also news reports that the FCA issued 146 warnings about cryptocurrency misconduct on the first day of the implementation of the regulation, which can be regarded as a warning to non-compliant behaviors in the regulation of cryptocurrency transactions.
Therefore, some high-quality platforms, especially platforms such as EBC that have a full FCA regulatory license, are even less likely to engage in cryptocurrency transactions due to regulatory and compliance needs.
From this perspective, EBC’s commitment this time is precisely a reflection of its compliance.
Liquidity
The second reason why high-quality platforms do not participate in cryptocurrencies is liquidity.
No matter what kind of transaction you are doing, liquidity is a topic that you can never avoid, because it ensures whether your transaction can be executed. The same is true in the cryptocurrency industry.
As we know, liquidity is affected by trading volume and volatility. The larger the trading volume and the more market orders, the better the liquidity.
Therefore, in the foreign exchange market, more than 60% of the liquidity is in the hands of 10 banks. A good platform only needs to connect with these banks to ensure the accurate execution of orders. For example, EBC has access to 36+ top liquidity, including 9 of the 10 banks I mentioned earlier, such as JPMorgan Chase, Citi, UBS, etc.
However, there is no such level of institutional liquidity in the cryptocurrency market, and the majority of investors are retail investors, so liquidity is limited. In addition, the number of cryptocurrency issuances is also limited. If these existing cryptocurrencies are not circulating in the market, the liquidity will be even weaker.
The second is volatility.
The foreign exchange market or gold, etc., are closely related to our real economy and do not experience extreme fluctuations, so the overall risk is controllable. Platforms with good liquidity have more orders at various prices and can ensure that only a small spread will be generated in any case. This is why EBC rarely encounters slippage.
But when it comes to cryptocurrencies, it’s harder to say.
For example, the popular cryptocurrency below often rises and then falls back. So the question is, there is a lack of strong institutional liquidity, and the price fluctuations are large, so what will the liquidity quotation be like?
Therefore, considering the liquidity level, some high-quality platforms do not get involved in cryptocurrencies.
Platforms like EBC, which have extremely strict requirements on liquidity, are even more cautious. I remember that EBC specifically enhanced the liquidity of US stocks some time ago. After this round of upgrades, the spreads of EBC's three major US stock index CFDs have all dropped to the lowest level in the industry.
The so-called enhancement means finding better liquidity providers or accessing more liquidity. No matter from which level, it helps us get lower spreads and better liquidity quotes.
For the general trading industry, it is very difficult to increase liquidity. For example, the threshold for liquidity access by a single bank is around US$50 million. This is even more difficult for the cryptocurrency industry, which lacks institutional liquidity. This is why high-quality platforms rarely get involved in cryptocurrencies.
In general, this time EBC used its attitude to keep out the illegal behavior in the industry that has been providing cryptocurrency services by stealing names. Whether from the perspective of security or trading experience, I think this is a very courageous action.
To put it another way, focusing on the areas in which you are good at and not following the crowd is also a valuable spirit in today's impetuous industry ecology.
