Bitcoin Trading Platform Atlas Partners With National Stock ExchangeNew York-based bitcoin trading platform Atlas ATS is partnering with a small U.S. stock exchange to expedite a regulatory approval process that has stymied the development of digital-currency exchanges in the U.S.
Under an agreement to be announced Wednesday, the National Stock Exchange, which is owned by the CBOE Holdings, CBOE +1.33% Inc. and is recognized by the Securities and Exchange Commission as a self-regulatory organization, or SRO, will write and enforce the rules governing how Atlas's exchange functions.
Once the two parties have agreed to those rules and surveillance procedures, Atlas will become the first bitcoin marketplace to be regulated by a "quasi-government entity," Atlas Chief Executive Officer Shawn Solves said.
That should mean it can bypass the time-consuming process currently confronting other budding bitcoin exchanges, such as Kraken and CoinMkt, both of San Francisco.
Those other exchanges have been forced to seek money-transmitting licenses from nearly all 50 U.S. states following instructions provided in October by the Treasury Department's Financial Crimes Enforcement Network, or FinCEN. In that guidance, FinCEN said federally regulated entities would be exempt from those requirements.
It isn't clear how the SEC, which doesn't regulate bitcoin, might respond to Atlas's use of the National Stock Exchange's SRO status to earn this exemption. The SEC declined to comment for this article.
In a statement, Atlas said its rule book would be based on SEC-approved rules used by U.S. stock and option exchanges. These establish requirements for record books, the segregation of customer accounts, security of assets and other standards.
For the all-electronic National Stock Exchange, or NSX, the move could deliver a new source of revenue and relevancy in an industry increasingly dominated by far bigger exchanges such as IntercontinentalExchange ICE +1.62% Group and its NYSE-Euronext unit and Nasdaq OMX NDAQ +3.21% Group.
NSX traces its roots to the Cincinnati Stock Exchange, founded in the 1880s. The NSX so far this month has averaged just 0.2% of daily stock-trading volume in the U.S., according to data provided by BATS Global Markets Inc., a competitor to NSX.
An NSX president, Francis Corcoran, declined to comment.
Atlas's Chairman, William Karsh, is currently listed as a special adviser to the NSX. He said the decision to work with Atlas was made entirely by NSX Chairman and CEO David Harris. "I was instrumental in explaining what the industry around virtual currencies was all about, but that's about the extent of my involvement," Mr. Karsh said.
Atlas functions like an automated bitcoin trading system, providing rapid-fire, anonymous matching services for clients such as high-frequency trading firms, though it isn't formally regulated as an ATS by the SEC. Atlas also offers a public exchange where prices are broadcast to all market participants.
Launched last month with links to sister exchanges in Hong Kong and Singapore, the marketplace is currently processing 7,000 to 10,000 transactions a day while the public exchange is handling volume of just 100 to 1,000 trades a day, Mr. Solves said.
Atlas's launch coincides with efforts by other Wall Street-connected firms, such as private exchange SecondMarket Inc., to develop robust, high-tech and regulated bitcoin exchanges for professional investors. These are presented as alternatives to the Internet-based offshore retail exchanges that currently dominate digital-currency trading and whose vulnerabilities were highlighted by the collapse of Tokyo-based Mt. Gox in February.
Bitcoin's price soared to a peak of $1,145 in early December. However, it has since fallen below $500, according to a Coindesk index, following a string of negative developments, including the Mt. Gox bankruptcy.
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