The SEC has taken a number of enforcement actions against crypto exchanges in recent years. Some experts believe that the SEC is overstepping its authority and that the enforcement actions are stifling innovation in the crypto space. Others believe that the SEC is right to crack down on crypto exchanges that are not complying with the law.
BitcoinBTC has been classified as a commodity by the Commodity Futures Trading Commission, making it different than the tokens often sold on crypto exchanges. A number of exchanges have capitalized on this clarification by focusing solely on bitcoin. While crypto exchanges initiated mass layoffs during the bear market, many bitcoin only exchanges continued to grow, making them an increasingly popular choice as investors seek out safer options.
The SEC’s enforcement actions and the growth of bitcoin only exchanges are likely to play a significant role in shaping the industry’s future. The following exchanges focus on bitcoin only and may serve as a hedge against regulatory uncertainty for interested investors.
Strike
Jack Mallers is the Founder and CEO of Strike, a digital wallet built on bitcoin’s lightning network that provides peer to peer and cross border payments similar to Venmo or PayPal. He has spent the last decade in the bitcoin space, pioneering efforts in distributed systems infrastructure and application development as one of the first lightning network application developers. Though Strike has grown into a popular app for purchasing bitcoin, becoming an exchange was never the company’s intention.
The idea for Strike came from Mallers’ experimentation with the lightning network. “With lightning, the money is in the message and the message is the money,” Mallers told me in our interview, comparing the lightning network to an instant messaging protocol. The lightning network is a second layer network built on top of bitcoin that allows individuals to send bitcoin instantly and with very low fees.
“Payments are promises of future settlement,” Mallers said in our interview, referring to the time needed in the current financial system for payment finality. He sees the lightning network as a means to eliminate settlement time, in turn reducing counterparty risk, the need for intermediaries, and ultimately transaction fees.
Strike leverages the lightning network by converting customers’ currencies into bitcoin and transferring that money instantly over the lightning network. At the receiving end, the bitcoin is converted back into the local currency. The speed of the transaction eliminates bitcoin’s volatility risk, transforming the lightning network into a new payment rail like ACH or wire transfers.
Mallers told me that their mission is better money, superior payments, and access to bitcoin for all. Their mission appears to be going well, having recently closed an $80 million funding round and expanding their business into 65 countries. Strike estimates that its total addressable market is now 3 billion people.
Swan
Cory Klippsten is the CEO of Bitcoin the financial services firm Swan.com. Before bitcoin, Klippsten worked for GoogleGOOG, McKinsey, MicrosoftMSFT and Morgan StanleyMS, after earning an MBA from the University of Chicago.
Swan features automated savings plans and withdrawals for retail customers, with specialized services for high-net-worth individuals and institutions as well. This year, Swan also started offering an in-house IRA product, allowing customers to hold actual bitcoin in a tax-advantaged manner, reducing the need for high fee exchange traded products.
Swan’s commitment to education makes it unique among other exchanges. “We believe Bitcoin will change the world for the better, and we’re dedicated to helping the world understand why,” Klippsten said in our interview about the intent behind their production efforts.
Swan’s educational commitments grew further in 2022 with the start of their annual Pacific Bitcoin Festival in Los Angeles. This year’s festival begins on October 5th and is expected to host over 2,000 attendees. Despite their growing popularity, Swan claims to spend a minimal amount of money on marketing campaigns. Klippsten concluded that “when people understand the truth about Bitcoin, they tend to get on board, so education is the only marketing we need.”
River
Alexander Leishman is the CEO and Founder of River, a bitcoin financial services company. “My goal was to create my own commodity-backed currency that the government couldn’t inflate, but never quite figured out how to make that a viable business,” Leishman said about his journey leading up to bitcoin. Because of this, he was able to understand bitcoin relatively quickly, realizing that it could replace the role served by a commodity backed currency.
“The post-bitcoin cryptocurrencies never quite appealed to me because there was no obvious problem they were solving,” Leishman recalled about his bitcoin only focus. He soon recognized the opportunity to build a financial institution based on bitcoin, ultimately leading to River’s creation.
River differentiates itself by having full control over their custody infrastructure. In doing so, River states that they have a higher quality of service with stronger guarantees for their customers than other firms. River provides services to individuals, institutions, and the lighting network infrastructure powering bitcoin applications like El Salvador’s Chivo wallet. The Salvadoran government introduced the Chivo Wallet as a solution to onboard citizens when it adopted bitcoin as legal tender in 2021.
River also offers a mining product, allowing customers to purchase hosted bitcoin miners directly in the app, akin to a turnkey rental property service. “We are always thinking about which products to build next, but we are very conservative and tend to avoid complex financial products,” Leishman said about River, contrasting the company with the recent failures in the crypto space. River recently closed a $35 million funding round, a testament to their strength in the midst of a bear market.
Relai
Julian Liniger is CEO and Co-Founder of the European bitcoin app, Relai. He studied psychology and business administration in Switzerland before becoming an entrepreneur. Lininger credits a friend with his introduction to bitcoin in 2015, but said it took him until 2017 to fully grasp the economic implications. Relai is now the top bitcoin on-ramp in Europe, with over 200,000 downloads, 65,000 active users, and over €10 million in monthly trading volume.
“[Crypto] can be categorized as high risk, speculative venture investments. Bitcoin, on the other hand, is for long-term saving,” Liniger said in our interview about the company’s bitcoin only focus. He says their mission is to help people save their money and purchasing power in the long run, contrasting their goals with the big crypto exchanges typically used for trading.
Relai allows customers to buy bitcoin quickly and without registration, 24 hours a day, and send the purchased bitcoin straight into the customers’ self-custodial wallets. Relai said this method is intended to eliminate counterparty risks present with custodial structures.
Liniger told me in our interview that “despite the market turmoil… and crypto exchanges failing, we have doubled our volumes and revenues,” speaking to the success of Relai’s strategy. According to Liniger, customers have continued to buy bitcoin at increasing rates regardless of the price action.
Regardless of your choice, bitcoin only exchanges are a good option for those seeking to begin their journeys with simplicity. With automated savings plans and reduced regulatory risks, bitcoin centric exchanges are emerging from the bear market largely unscathed. Their recurring successes in fund raising and responsible growth strategies are indicative of their potential for longevity. These companies remain optimistic that they will continue to onboard newcomers for a long time into the future.
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