Swarm Markets launches BaFin-regulated decentralized trading exchange

Swarm Markets has launched with over $15 million pledged from more than 250 individuals signed up to its liquidity provider programme.

Integrating new capital, market participants, and assets will allow Swarm Markets to offer tokenized securities that can be traded alongside crypto assets in one regulated and liquid environment.

The decentralized trading exchange (DEX) operates under regulatory license from the Federal Financial Supervisory Authority (BaFin) in Germany.

Swarm Markets operates on the following provisional licenses under the German Banking Act (KWG) provided to Swarm Capital GmbH: Commission Business; Agent Broking; Trading on own account; and Custodian Business.

Regulation is seen as one of the biggest barriers to mainstream institutional crypto adoption because of the counterparty verification requirements.

Swarm Markets addresses ID verification issues using AML and KYC protocols typical to regulated platforms, allowing all participants to be verified, removing counterparty risk, whilst remaining private.

Philipp Pieper, Co-founder of Swarm Markets, said: “We’ve seen the total value locked in DeFi grow exponentially since the DeFi summer of 2020. People are looking for ways to make their collateral work for them but need to operate in a trusted and secure environment that suits their compliance needs. That’s where Swarm Markets comes in.

“We see regulation as necessary for the evolution of DeFi as opposed to it being a limiting factor. Instead of reinventing the wheel, we’ve applied existing German regulation to DeFi markets. This regulatory layer will give enough assurances and protections to allow capital and assets into the ecosystem that have been sitting on the sidelines for too long.”

Swarm Markets co-founder, Timo Lehes, commented: “We find ourselves in a perfect storm where interest rates are historically low and people’s assets are not being put to good use. It’s accepted there are certain advantages of moving trading business onto the blockchain but asset owners are concerned with counterparty risk and compliance.

“Tokenization can help you do more with idle assets. By bringing real-world assets onto the Blockchain, the collateral value generates more yield for asset owners⁠—the amount of liquidity pledged in our launch provider programme is testament to this. Through our licensed protocol we can bring new assets onto the Blockchain, expanding the current DeFi ecosystem by 10-100X.”

Customers will enjoy full custody of collateral as they pursue their trading strategies. Swarm Markets uses smart contracts for its transaction protocol in order to give rise to more trading pairs and ‘legos’. Soon, the venue will launch a payment token, giving early adopters of the platform 50% trading fee rebates and other rewards.