Welcome and thank you to all our new visitors to itBit! We're thrilled to now be available in the U.S. and we have been overwhelmed by the thousands upon thousands of curious visitors and new customers.
While we are attracting attention from new traders in the U.S., we're glad to see that many are prudently and scrupulously combing through our FAQs and Terms & Conditions. It's important to us that our users understand our intentions and how we operate, so we decided to take the opportunity to address some new questions we have been getting. We hope this helps -- but please do get in touch if you have any concerns.
1) What is market making, and why do you do it? Is this something we should be concerned about?
Market making is a standard practice amongst almost all exchanges globally. Nasdaq, NYSE, futures markets, FX markets and many others engage market makers to help supply liquidity and provide execution to exchange customers. Market makers maintain an orderly and efficient market by providing tighter bid/ask spreads, increasing liquidity across the order book (which in turn lowers volatility), benefitting both buyers and sellers.
In other words, market makers generally help exchanges operate with fairer, tighter pricing. It's a net positive for all users. We do allow our users to execute market making strategies, but no users are currently granted preferential access to do that.
2) Section 2.26 seems to imply that itBit allows frontrunning. Why do you do this?
To be absolutely clear-- we do not allow front running. On the itBit exchange, no one is operating with preferential access. We are extremely committed to offering an open and true market where all users are on equal ground.
All users (including users who have strategies resembling those of market makers) operate under price-time priority constraints, equally. Again, to be clear, NO ONE has advance access to the order book.
We would only consider giving additional access to market makers if it provided a net benefit to all of our users and the market overall by enhancing best execution on the exchange for everyone. Just as importantly, If we were to start this program, we would notify our users in advance.
3) itBit is regulated by New York State. What about the rest of the states?
itBit, through its New York-based exchange, can serve customers throughout the United States who comply with itBit’s on-boarding process and conduct their transactions through the New York exchange. The trust company charter is a well-established vehicle to conduct exchange services, as illustrated by the several national exchanges using that charter in New York. While the state of the law governing virtual currencies is in its infancy, itBit will continue to comply with applicable state and federal law to serve its customers and has demonstrated its commitment to regulatory compliance through its chartering as a New York Trust Company.
4) Does this trust charter mean that you don’t need to get a BitLicense?
Yes, while we meet all the standards of the BitLicense, we do not need to apply for a license. The proposed framework exempts companies that are chartered under the New York Banking Law and are approved by the superintendent to engage in Virtual Currency Business Activity. This is because the rigorous standards of a trust charter are actually much more extensive than the BitLicense.
5) Do you insure customers’ bitcoin?
By requirement of our trust charter, the itBit Trust Company holds regulatory capital, meaning that we back our U.S. customers assets with capital held in escrow for safety and soundness purposes. That means that no matter what happens, we are responsible for our customers’ deposits - including both dollars and bitcoin. As further protection, our banking partner also provides FDIC insurance for our U.S. customers’ U.S. dollar assets (up to $250,000).
We hope this clears up some confusion. Our commitment is to giving our users a completely fair, open and trustworthy exchange. It's the core of our business and we would never want to operate any other way. If you have any further questions, please email us at email@example.com.