Globitex – Bitcoin Commodities Exchange For Global Trade

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Globitex is an institutional grade Bitcoin exchange, with unrivalled API capabilities for direct market access. The project has received venture capital funding with the aim of scaling Globitex to the necessary industrial trading level, with the capacity to accommodate standardised money markets and commodities listings using Bitcoin as means of settlement and unit of account.

The Opportunity

If the Bitcoin economy is to achieve the necessary scale to meet institutional investment needs, it will require a substantial increase in liquidity.  The formation of stable capital markets, along with their corresponding interest rates will establish natural market-based reference rates, and thus increase liquidity and price stability.

 

Globitex’s strategy is to launch other major currency pairs; to expand the Bitcoin-FX order books, thus covering instant trading, deposits, and withdrawals in major currencies around the globe. The next step is to develop cryptocurrency money markets, where eligible market participants can lend out their assets at specific maturities by setting market-based interest rates, coined BIBOR (Bitcoin inter-broker offer rate). The development of a money market in Bitcoin will be the major catalyst in increasing liquidity and equalising supply and demand for Bitcoin in the spot market, as well as for various future time frames, potentially transforming it into the most liquid currency. As Bitcoin liquidity increases and large money orders can be easily accommodated, Globitex will then enable standardised listing of various commodities futures and options on an open order book basis. The derivative contracts will be physically deliverable and exchanged in Bitcoin as the underlying currency.

Scaling Globitex into a global spot and derivatives trading venue will allow producers to purchase exchange-listed products for Bitcoin. Trading firms will also be able to hedge risk in Bitcoin with derivatives contracts. Thus, scaling the Globitex exchange will benefit Bitcoin and foster its development as a medium of exchange that is suitable for facilitating global trade, overcoming geographic, political or monetary restrictions.

The Solution

Launched in 2017, the Globitex system is being tested in a limited Beta mode and is expected to begin open public operations by the beginning of 2018. They support the following products currently: XBT/EUR and BCH/EUR.

Globitex has a functional API that provides multiple ways to access the exchange trading facilities and application. They currently offer the following API options:

  • FIX API – the most efficient way to receive current market quotes and place orders via industry standard Financial Information eXchange (FIX) protocol.
  • RESTful API – exchange functionality available as widely used web services.
  • Streaming API – allows to improve web service efficiency for receiving market data using streaming functionality based on WebSocket and Socket.IO protocol.

To support new commodities and money market products and services, and to enhance user experience, the following modules are to be added to the Globitex system across three stages of business development:

  • Cryptocurrency REPO (Repurchase Agreement) system
  • Futures instrument trading module
  • Options instrument trading module
  • Swap instrument trading module
  • Risk control module for leveraged position margin control
  • Clearing and settlement system for futures, options, swaps and physically settled instruments
  • Cross-linkable instrument liquidity derivation services
  • Iceberg and hidden orders
  • Dark pool trading services
  • Responsive web platform for mobile devices
  • FAST protocol (FIX Adapted for STreaming) for low latency price streaming
  • Integration with SEPA euro payment system

The Globitex platform will organise a REPO as a peer-to-peer lending facility, which will support options to create collateral-secured loans for clients. Introduction of the Futures, Swaps and Options trading modules requires an implementation of specific processing logic in the Risk Control Module and the Clearing and Settlement system, including:

  • position opening and closing for the contract,
  • initial and maintenance margin calculation,
  • mechanism for margin call processing and position liquidation in case of breach of margin requirements.

A specific execution process for Options instruments will also be implemented.

Globitex has been granted an Electronic Money Institution (EMI) license by the Bank of Lithuania. This license enables Globitex to carry out payment services and e-money issuance in the EU. Their EMI license will also allow Globitex to integrate with the Single Euro Payments Area (SEPA) euro payment system directly through the Central Bank of Lithuania, enabling NexPay to clear euro payments directly, without the involvement of commercial banks, and to issue IBAN accounts to Globitex clients.

The GBX utility token will be issued as an EIP-20 compliant Ethereum smart contract. The GBX Token will primarily be used for the settlement of trades on the Globitex exchange, as the means of paying commission fees and services. It will also function within Globitex loyalty programs for clients and contributors, who will participate in the company’s overall success, through token rewards.

GBX token has a value of EUR 0.10, but when a client opts to use a token to pay for commission, the client with enjoy a bonus of at least 20% (for example 1 GBX token will be worth 20% more = EUR 0.12) if it’s used to pay for transaction fees in comparison to paying using Euros.

Globitex may choose to increase these premiums in the future to stimulate the widespread utilisation of the token for trade settlement. Clients may choose to redeem tokens as payment for commissions on the Globitex exchange. Tokens currently have a ten-year lifetime, once elapsed, the token program will be reviewed and necessary adjustments made.

 Opinion

Globitex’s goal of developing an exchange platform where bitcoin and other cryptocurrencies can be used as a medium of exchange and a unit of account is necessary for the Bitcoin economy to mature. I applaud their vision of building a platform with all the traditional functionality of money market platforms including financial reporting, regulatory compliance and API’s.  If successful in their quest, there is huge addressable market to be won.

Globitex also address MiFID II compliance and under which licensing framework of the directive, they wish to operate – OFT licence.  This shows their commitment to delivering a fully regulatory compliant system based on KYC and secure technology.  Globitex’s target market is NOT retail investors that are thinking of getting their feet wet in the world of cryptocurrencies. Their goal is to become a fully functional exchange platform similar to those used by institutional players, with the only difference being that bitcoin is used as the medium of exchange and unit of account.  Their ideal clients are professional traders and institutional investors that wish to diversify or move into cryptocurrency within a fully compliant structure.

The lack of technical detail in the whitepaper does not imbue me with confidence in the team’s expertise in terms of cryptocurrency security or payment technology.  Although there is a beta version of the Globitex Exchange successfully operating, it does not reside on the blockchain. I would have expected Ledger technology or its applications around KYC and data identity to at least feature in some way in their business development plans.

I would like to use an analogy to illustrate my point: Where do a bird and fish live? Asking Bitcoin to fit into traditional money market structures with LIBOR/BIBOR rates, futures, options and derivatives, is like asking a bird to swim. It drowns as the weight of the water coats its feather and limits its ability to fly.  Bitcoin’s move towards mainstream adoption may create more liquidity or price stability in theory, but it may not in reality. No one knows and therein lies the problem with pinning Bitcoin to traditional money market structures.  Globitex is keen to put theory into practice.

©CeAnn Simpson

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