It has been recently announced that LMAX, an FCA-regulated forex multilateral trading facility, is introducing Ven trading capability.
Ven is the “digital currency” created by the social media site Hub Culture. Launched in 2007, it is claimed to be the first successful floating digital currency. In its earlier years, Ven was Hub Culture’s internal mode of currency for trade of site-related value such as access to articles or videos. Thereafter, it is said to have its value “backed” by a basket of currencies, commodities and “carbon” (that is, credits for greenhouse gas emissions). It is also now reportedly used as mode of transfer even for general merchandise.
To put the significance of this announcement in perspective, let’s first look at the value of Ven in fiat (such info happens to be extremely difficult to uncover. By comparison, valuations of any fiat, Bitcoin or even exotic crypto are publicly and instantly available). According to a clip of Ven’s trading platform, one Ven is worth $0.10. According to the Wall Street Journal, there are 1 million Ven in existence, making for a total market cap of $100,000.
To put this in perspective, this is a lower market cap than some of the most exotic cryptos including Devcoin (ranks 17th), Tigercoin (ranks 59th) and RonPaulCoin (63rd).
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The next thing to consider is the exact nature of Ven’s “backing” by the aforementioned basket of value. It should be noted that several of the outlets reporting on this story and even Ven’s own website don’t use the term of “backed”, rather that Ven’s value is “determined” based on the basket’s value. Here again, it is unknown, or at least prohibitively difficult to find out, exactly which, where and how many commodities, currencies etc. back the ven. If it is indeed backed, who backs them and what is the legal mechanism by which this is employed? And if they are only “tracked”, what is the formula?
This brings us to LMAX’s choice of Ven as one of its traded currencies. If it is indeed backed by such hard reliable assets, it isn’t really a digital currency. It’s a portfolio of value, an ETF-like instrument that bears no comparison to digital currency, and considering its partial backing by real assets, won’t even compare to fiat.
If there is no backing, the next question is: why was is selected over other better known, highly-valued digital currencies such as Bitcoin or Litecoin? According to LMAX CEO David Mercer, “Virtual currencies, such as Bitcoin, have been the focus of a lot of attention over the last year. The challenge going forward is for them to become transferable. In order to become credible virtual currencies have to be able to be used as a purchasing tool. Ven is ideal as the first virtual currency we are listing. But is also by no means the last, and fully we intend to exploit the market potential that credible virtual currencies have to offer.”
The reality is that Bitcoin has become highly transferable with real-value items, especially when considering recent developments such Overstock’s acceptance as a form of payment.
Undoubtedly, the significance of LMAX’s addition is the fact that they are a regulated entity now accepting “digital currency”. The question arises: if the firm remains regulated, how is Ven regulated by extension, and if it isn’t, is it possible for other regulated firms to introduce cryptocurrency isolated from regulation?
The rationale behind this decision and the prospective roadmap observed by LMAX and its peers for cryptocurrency needs some clarification. In the meantime, the gold standard of cryptocurrency Bitcoin doesn’t seem to have reacted at all, showing its flattest activity in weeks.