Interview with Marek Socha about the Crypto Ecosystem and SDX’s Development Plans

In this interview, we talk with Marek Socha about his work on AsiaNext, an exciting new joint venture between SBI Group and SDX that is building a regulated digital asset exchange in Singapore. We also discuss M&A prospects in the crypto ecosystem and look at what might be next for SDX at home in Switzerland.

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Marek Socha is Head of Corporate Development and Member of the Extended Executive Committee at SDX. He has an extensive background in corporate development, M&A, venture capital, strategy, and finance. He is bringing his experience in traditional capital markets and digital asset markets to build out the ecosystem around SDX and develop it into digital market infrastructure (DMI) of the future.

Hello Marek! Could you start by telling us a little more about your backgroundand what you do at SDX?

I currently head up the Corporate Development team at SDX, which is responsible for originating new strategic opportunities and executing all the significant partnerships, joint ventures, M&A, and strategic investments which support the build-up of the ecosystem in which SDX operates. In this role, I report to the Head of SDX, David Newns. Although I formally joined SDX fairly recently in mid-2021, I have been involved with SDX since its creation in 2018, through my previous role as SIX Group’s Senior Mergers & Acquisitions Manager.

Please tell us about AsiaNext and its origins. How was it built out, and where are we now?

On the SDX journey, we have naturally focused first on our home market by ensuring that the platform is licensed and live in Switzerland. That said, we always knew that international expansion is inevitable and had an eye on the expansion to other key jurisdictions. Asia as a region, and Singapore specifically, holds a great deal of promise and potential for growth in broader digital assets, and specifically digital securities and Web 3.0 which includes crypto. There are also multiple similarities between Switzerland and Singapore in the way their financial markets operate, including focus of the local regulators (MAS and FINMA) on creating the right and robust regulatory framework for digital assets. Some time ago we had made the decision to develop our presence in Singapore, intending to build a regulated trading venue for cryptocurrencies and digital securities. The plan was to enable access to digital assets for our existing and future European clients with presence in Singapore but also to onboard local financial institutions originating from Singapore. In the future we also intend to build interoperability and links between Singapore and our home market in Switzerland.

We knew that, although SIX Group has a presence in Singapore, expanding the digital asset offering on our own would not be the most appropriate way. We found an ideal partner in SBI Group, a Japanese financial conglomerate with many FinTech, crypto and digital asset-related investments globally and a specific interest in Asia with a great desire to expand its presence in Singapore. And that’s how AsiaNext was born. We are now advancing in building out the new business, finalizing hiring the local team, submitting first license applications to MAS and ensuring that the joint venture can operate on a standalone basis, with local resources, management team and staff on the ground in Singapore. It is also fair to say that building such new regulated business from the ground up, remotely and with very limited possibility to travel to Singapore due to still recent Covid-19 restrictions, has been challenging at times. Having said that, we are progressing according to the plan.

What services will AsiaNext be offering?

AsiaNext will have three main offerings: crypto spot trading, crypto derivatives trading, digital securities trading and required ancillary services. We are working with local and global partners, like banks, asset managers, market makers, family offices and other financial institutions to understand their needs and build up the client base. We are also working with several leading technology providers, who are helping us to build the technology stack that is institutional grade, robust and secure – something that SDX and the entire SIX Group is well known for. Finally, we are engaging with local regulator to ensure full compliance and robustness of AsiaNext’s institutional offering with laws and regulations. In that sense, we will form some important partnerships, both locally and with global firms operating outside Singapore. SBI is also building its Singapore presence through recently established SBI Digital Markets, which will focus, among others, on the brokerage offering. SBI Group also owns a market-making firm, B2C2, so we envisage that these will form core relationships as we build out the AsiaNext ecosystem, enabling each other’s success in the marketplace.

What is your view on the crypto M&A outlook both generally and for SDX in particular?

We currently see several more mature companies in the Web 3.0 and digital securities space than, for example, back in 2018 or 2019, and we see some interesting firms on the horizon with whom we could work together as partners or potential acquisition targets. Obviously, as with any M&A prospects, I’m not able to go into any more specifics, though!

Some of these prospective targets are often quite expensive to buy, and many are focused on serving retail customers, which is not our target market. Our focus as a regulated FMI in digital securities and a Web 3.0 solutions provider is first and foremost on the institutional clients. That applies equally to Switzerland with respect to SDX and to Singapore for AsiaNext.

Overall, I expect to see ever increasing consolidation and abundant M&A activity in the space in the coming months and years, especially given ongoing market turmoil and inevitable shake-out and consolidation that usually follows. As to whether we as SDX would acquire targets is something I can’t comment on but certainly the path of partnerships, identifying strategic synergies and creating ecosystems with various key industry players is equally appropriate way forward. As always, though, when we come across something that fits our strategy and operating model, we will pursue those targets on a case-by-case basis.

What’s next for SDX back at home in Switzerland, and how will our services evolve?

SDX is currently at an exciting point in its development. Last year, in September 2021, we became licensed by FINMA to operate a fully regulated stock exchange and central securities depository (CSD) based on blockchain technology. In November 2021, we went live, issuing the world’s first digital bond. We are currently focusing on three main pillars as we move forwards with SDX.

The first one is around loading the existing regulated platform with new issuances in terms of digital securities such as bonds and equities. In addition, we are entering into strategic partnerships to help develop our ecosystem market participants like recently announced collaboration with FQX, Daura and Aequitec. Secondly, we are expanding our Web 3.0 presence. Earlier in June we announced SDX Web3 Services, a new SDX business line which will initially offer products such as non-custodial staking and crypto custody – and these are just two examples of the most important initiatives that we are currently pursuing. Thirdly, we are looking at long-term business prospects and our future offerings. These could include alternative assets, real estate, carbon, NFTs and other currently non-regulated asset classes that are enabled by blockchain technology and in great need for fully-fledged institutional solutions. All these hold a great deal of potential and interest for us but are not necessarily things we plan to pursue immediately in terms of our current strategic focus.

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