Established in 2019 in Singapore, Phemex is operating as a crypto derivatives exchange. The platform “reached the top 10 global exchanges in less than two years, with daily peak trading volume of over $12 billion.” Cointelegraph spoke to Jack Tao, founder and CEO of Femex, about the difficulties and risks of running a crypto exchange and where he plans to take Famex forward.
Tell us about the story behind the exchange and what it was like to launch a trading platform during the crypto winter?
The story behind Femex is one that seeks to provide solutions to many of the issues I see in traditional finance. When I initially discovered crypto, I was really excited because it was a way that would allow me to overcome the inefficiencies of traditional finance.
One technological solution, in particular, is blockchain. Because it offers so many possibilities, my initial motivation was simply to try it and find out more. This inspired me to set up some minor mining operations and experiment with different exchanges and trading platforms.
My first venture into cryptocurrency ended in significant losses. Despite the huge promise offered by crypto, I realized that the sector still has a long way to go. The exchange I was using at the time had a lot of technical issues, resulting in frequent outages and hacking. There were no standards in place, and little trust. To fix this, I tried to find a solution by combining my financial and technical expertise gained on Wall Street.
The end result is Femex, a powerful and efficient platform dedicated to helping everyone, not just a select few, achieve financial independence, regardless of their partial Wall Street background. Phemex is great because it leverages traditional finance standards and tools while staying true to cryptocurrency’s values of financial freedom and self-empowerment.
How does a decade long experience at Morgan Stanley help you manage your company?
Prior to co-founding Phemex, I held the position of Vice President of Global Development for Electronic Trading (MSET) Benchmark Execution Strategies (BXS) at Morgan Stanley. My experience in finance gave me the fundamental skills and insights that made it possible to launch Femex.
Because I had over ten years of experience building high throughput, low latency, large-scale algorithmic trading platforms, I was able to pinpoint the primary problems that the TradeFi sector faces. Because I could recognize the problems, all I needed to do was find a solution, which was to build Femex as one of the most reliable cryptocurrency and derivatives platforms out there.
I am proud to say that Phemex has grown exponentially since its launch, and we now offer a variety of crypto spot market and derivatives contracts with 100x leverage. We have reached the top 10 global exchanges in less than two years, with daily peak trading volume of over $12 billion.
What are the most difficult aspects of operating a crypto exchange? Does location play any role in this?
Operating a cryptocurrency exchange is no easy task. To ensure that we are providing our users with the most reliable and secure platform, the major challenges include security and security concerns. System and user account security is one of our top priorities, and we have designed and implemented a hierarchical deterministic cold wallet system that assigns different cold wallet deposit addresses to each user.
All deposits on Phemex are collected from time to time in the company’s multi-signature cold wallet through offline signing. Based on our sophisticated Wall Street risk control experience, we are able to detect any malicious action and act promptly to protect the assets of our users and the Platform. Qualified withdrawal requests are also processed via offline signing, whereby all assets are 100% stored in the cold wallet system and all operations are offline.
With regard to location, choosing where to operate a cryptocurrency exchange is not that much different from choosing to operate a normal business. The ideas are actually quite simple: you want a good business and supportive policy environment, a growing economy, a city or group with talent that is innovative and entrepreneurial, as well as other business-friendly regulations and compliance structures.
Singapore is one place that matches these criteria. Singapore has emerged as a major cryptocurrency hub in Southeast Asia. Not only does Singapore have a strong financial sector and geopolitical position, but the city has also created a crypto-enabled environment, which is essential for Femex’s growth in such a short span of time. We are rapidly expanding our team in Singapore, and I look forward to seeing what happens in the future.
How is doing this business in 2022 different from doing it in 2019?
The cryptocurrency and blockchain business has certainly changed from 2019 to 2022. I will give you some examples.
In 2019, the crypto market cap dipped below $200 billion. Right now, the market cap is $1.6 trillion, and at one point in 2021, it reached $3 trillion. So the difference in this regard is quite clear. There is greater focus on the industry, greater investor interest, and greater adoption, both retail and institutional. So now in this environment where there is more demand than before, doing business there has been very beneficial.
Another difference now compared to 2019 is the actual cryptocurrencies on the market. An interesting exercise that I would recommend any curious reader to do is to keep a yearly tab on the top 50 cryptos from any base year and compare it to the next. It would look like comparing different technology eras.
But despite the rapid changes in the industry, we at Femex will continue to grow, and we will continue to launch new products and give our investors access to the best cryptocurrencies on the market.
“Many businesses claim to adopt the ideals of crypto and blockchain, but the reality is that they have applied the same old model, driven by profit and selfishness, to a new one. Our slogan, “Break Through, Break Free What do you mean by this statement?
After working in traditional finance for more than a decade, I was disillusioned by the many limitations and injustices I faced. The industry is plagued by unfair fees and inefficient systems. In various ways, all of them favor the rich and oppress the underprivileged. That’s why I said that many businesses today only apply the fundamentals of crypto and blockchain. However, many of these businesses simply apply the same old profit-driven and self-interested efforts to their own business model.
Our slogan, “Break Through, Break Free,” encapsulates the principles and objectives of our company. Femex has everything a person needs to break into a better system where real financial autonomy is not only encouraged but embedded at the core of the system. We believe that any person can have the power to change their life and choose their reality.
What’s next for Femex? What should your community and users expect in 2022?
From a fundamental new currency to re-organizing practically the entire traditional financial system on-chain to facilitate decentralized transactions, we have come a long way. We will recreate and invent any service or process imaginable in the next step, not just financial.
I’m also excited about some of the patterns I’ve seen recently. In particular, the metaverse and non-fungible tokens (NFTs) have sparked my interest. The current boom of NFT collectibles and art, although possibly inflated, still points to a promising future. We are rethinking what ownership is all about, and we are just getting started with new uses for on-chain assets.
Similarly, the Metaverse includes innovative game-fi, play-to-earn and wealth distribution mechanisms that have the potential to profoundly transform our digital activities. And this is only the tip of the iceberg in terms of what is possible and what lies ahead.
Phemex has assisted in the growth of the metaverse by listing properties such as AXS, MANA, YGG, SAND, SLP and many more to come. We will continue to keep a careful eye on this powerful megatrend.
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