VNX FAQ's

  • General questions
    • What is VNX Exchange? menu arrow

      A bridge between traditional financial markets and digital markets. VNX Exchange is aiming to build a regulatory compliant marketplace where venture funds would be able to list their tokenized investment portfolios, get access to the best deals available and to a far wider investor base. As a result, VNX Exchange deals with VC’s lack of liquidity and risk diversification in startup investing.

    • What issues does VNX Exchange solve? menu arrow
      • The problem of VC liquidity as it is recognized to be a notoriously illiquid asset class.
      • High entry barrier to a traditional VC fund.
      • Capital lock-up.
      • Risk diversification in startup investing.
      • Access to the best deals available and to a far wider investor base.
      • Transparency of the market.
    • What are the differences between VNX Exchange and other projects? menu arrow

      First, VNX Exchange seems to be a unique project in VC industry. Itsmain objective consists in building an ecosystem that would unlock huge amounts of VC (around $1T) and bring efficiency and transparency to a fragmented market. By creating a liquid secondary market for VCs, project would be able to solve a number of issues:

       

      • Significantly reduce capital lock in and mobilize capital by improving its velocity.
      • Make the VC industry more inclusive, improving capital accessibility for smaller and first-time VC investors, as well as those operating outside of capital-rich geographies like Silicon Valley.
      • Open VC as an asset class to a much broader global investor base, represented by both institutions and individuals that previously did not have the opportunity to invest in emerging technology businesses.
      • Improve transparency and competitiveness, thus making the venture industry more efficient.
      • As a result, improve availability of capital for entrepreneurs.

       

      VNX is based in Luxembourg, which is ranked the second largest European financial centre behind London and the first European country with a regulated digital money exchange market. VNX is eager to achieve full regulatory compliance and have been working with one of the leading Luxembourg law firms Elvinger Hoss, Big Four audit companies, and local financial regulators to receive all necessary licenses and approvals.

    • What are the key features of VNX Exchange? menu arrow
      • Listing simplicity and cost-efficiency.
      • Fast transactions in real-time trading.
      • Investor Protection.
      • Transparency and information services.
      • Top level customer service.
      • Support of VC Ecosystem.
    • What are the main pillars of VNX Exchange ecosystem? menu arrow
      • Inventory providers (e.g. VC funds).
      • Liquidity providers (e.g. Investors).
      • Financial services providers, like brokers, dealers, advisors and financial managers.
      • Professional services providers, incl. law and accounting firms, management consultants, valuation providers, insurance companies, IT services providers, custodial services providers, etc.
      • Media, incl. traditional and digital players, news agencies, journalist community, news aggregators, etc.
      • Professional associations, e.g. ABBL, ALFI, LPEA.
      • Research institutes, e.g. University of Luxembourg.
      • Regulators, e.g. CSSF.
    • What sort of cybersecurity solutions does VNX Exchange provide? menu arrow

      VNX Exchange together with the University of Luxembourg’s Interdisciplinary Centre for Security, Reliability and Trust (SnT) aim to create a new standard of security for the market ecosystem for digital assets. The resulting technology may significantly reduce the global costs for cybersecurity. SnT will design new IT frameworks for the project facilitating a secure exchange of digital assets on blockchain networks. The research will also assess several distributed ledger architectures. The two partners plan to contribute to the introduction of regulation and cybersecurity to blockchain, allowing the creation of reasonable rules that will balance the interests of all involved players.

    • Is VNX Exchange centralized or decentralized? menu arrow

      VNX Platform is expected to be regulated and eventually centralized.

  • Industry questions
    • Why does VC industry need changes? menu arrow

      VC is recognized to be a particularly illiquid asset class. An average VC fund locks investors’ capital for 10-12 years, which tends to be too long for most of them. Besides, VC has a large number of risks related to startup investing, high entry barriers and harsh exit terms. As a result, the industry is prone to scale effects, with a handful of large firms concentrating the most investable capital. Lately, this has led to a steady increase in the average VC fund sizes and to a decrease in early stage startup funding, making capital less available to entrepreneurs.

      One of the most efficient solutions, that might address the issue, seems to be tokenized securities. The point is that they could bridge the gap between traditional financial markets and digital markets because they can unlock an enormous amount of VC and bring efficiency and transparency to a fragmented market.

    • How has the relationship between investors & VCs changed since the introduction of crypto into the industry? menu arrow

      According to experts, traditional investors are getting more and more interested in blockchain based digital instruments to raise additional capital much faster. Doubtless, digital assets platform powered by blockchain technology seems to be an ideal instrument to raise additional capital, to get some interest from the main street investors, and to bring a huge amount of institutional money, because big institutional money requires liquidity. In fact, having billions of dollars frozen, even in a good asset, means that they are still illiquid. Meanwhile, blockchain gives investors the opportunity to have good returns and to exit any time they like to.

    • What is traditional asset tokenization and why is it so cost-effective? menu arrow

      Let’s take an example of a painting by Picasso. Instead of owning a Picasso, tokenization means the holder might offer digital shares of ownership in a masterpiece. The fractional holders would benefit from buying or selling their digital shares to take advantage of higher or lower prices. The point is that as a digital security, it can be quickly and easily traded online. The holders follow the price every day, which is transparent, instead of waiting for a Sotheby’s auction, for example. Thus, tokenization of traditional assets could provide a number of advantages such as higher liquidity to asset owners, 24/7 deals, lower transactions fees, automated and quicker governance, absence of intermediaries, fractional ownership and others.

    • What is digital asset custody and why does the industry need it? menu arrow

      One of the essential concerns for digital money investors is that they would lose their private keys because of hacking attacks, problems with hardware, mismanagement of the secret passphrase etc. Around 4 millionbitcoins are reportedly lost through such issues. Nowadays custodial solutions are expected to be the most innovative and promising methods that might deal with the matter. To put it simply, investors should store their digital assets with a regulated custodian. Such custodians are intended to place digital assets in deep cold storage. In other words, they should be stored offline on a system that has never been connected to any network. These steps could secure funds in the best possible way.

      VNX Exchange is constantly working on the ways to introduce regulation and cyber safety to the blockchain, as well as to create a range of reasonable rules aligned with everyone’s interest. We believe that digital asset custody might hit the market, especially when it comes to institutional investors, who apparently don’t have enough experience handling digital rights.

  • Operational questions
    • How does VNX Exchange operate? menu arrow
      • The Inventory provider (e.g. a VC fund manager) submits its listing application to VNX.
      • VNX, together with designated 3rd party service providers, performs the evaluation of the VC fund’s investment portfolio (legal due diligence, asset valuation etc.).
      • After all the checks and assessment is performed, the terms of listing are defined and the initial book building auction date is announced, and Liquidity providers are invited to participate in the initial Revenue Token offering. Only up to 50% of any given fund or investment portfolio is allowed for tokenization and sale on the VNX platform, to ensure that the Inventory provider has a vested interest to continue to properly manage its investments and make profits on them.
      • On the auction date, Liquidity providers submit their investment bids and at the end of the auction the order book is closed, payments are settled and the tokens are distributed to the Liquidity providers. At the same time, the Inventory provider (VC) receives the token sales proceeds.
      • Following the end of the auction and initial token distribution, the tokens are added to the VNX List and made available for trading on the VNX marketplace.
      • As VCs sell their stakes in portfolio companies and receive profits, they pay a share of these profits to all token holders.
    • Who are VNX Exchange's inventory providers? menu arrow
      • VC funds (GPs and LPs).
      • Startup accelerators and incubators.
      • Corporate VC units.
      • Other types of venture investors with significant professional track record and expertise, who are holding startup investment portfolios.
    • What are the requirements for VNX Exchange's inventory providers? menu arrow
      • A proven track record as a portfolio (fund) manager of prior investment performance.
      • Particularly successful profitable investments.
      • Exits therefrom.
    • Who are VNX Exchange's liquidity providers? menu arrow
      • Qualified/accredited investors (both institutions and private), who participate in the initial book building auctions of VCs and are the initial purchasers of the Revenue Tokens, acquiring them prior the start of trading on VNX’s secondary market.
      • All other investors and traders (including qualified/accredited), who buy and sell Revenue Tokens in the VNX marketplace, once they are listed and admitted to trading.
    • What are the requirements for VNX Exchange's liquidity providers? menu arrow
      • The investor must pass KYC and AML and other risk and compliance checks.
      • The investor must confirm the “qualified investor” status (minimum investment size + knowledge & experience) and be a national from an eligible country.
      • The investor must hold VNX Tokens that grant access to the Book and also define the “weight” of the investor’s bids during the Book Building auction.
  • Team questions
    • What is the origin of VNX Exchange? menu arrow

      VNX Exchange is a Luxembourg based project thus it benefits of the whole Luxembourg ecosystem:

       

      • Luxembourg is the leading private banking centre in EU and the second largest centre for equity funds in the world.
      • The country is the leading European financial hub.
      • Luxembourg offers the ideal environment to support new technology innovations in financial services. The government has been investing and strategically developing the sector over the past years.
      • VNX Exchange is a member of the Luxembourg House of Financial Technology (LHoFT) that builds and fosters the Luxembourg Fintech ecosystem. The project assists Fintech businesses to effectively set up and grow, providing a soft-landing platform for access to the EU market.
      • The Grand Duchy is known for its modern legal and regulatory framework that is continuously updated and inspired by regular consultations between the government, the legislator and the private sector. Such efficient communications seem to be essential for FinTech projects as they often introduce innovative solutions that require a flexible approach from the regulator.
    • Why Luxembourg? menu arrow

      The country’s financial regulator, the Commission de Surveillance du Secteur Financier (CSSF), is a pioneer in the EU with its official Bitcoin Communiqué 2014. It stated that even if there is no specific legal framework, the existing traditional financial regulation may apply and that Bitcoin may qualify as “scriptural money” if broadly adopted as a means of payment by its user network.

      Moreover, the CSSF was the first in the EU to licence Bitstamp, the oldest digital currency trading platform in the world. Besides, one of the largest Japan’s electronic money exchanges bitFlyer was granted the same license by the CSSF in 2018. As a result, bitFlyer is licensed in Japan, the EU (via Luxembourg) and in 43 of the U.S. states.

      On 14 March 2018 the CSSF issued two new documents: VC Warning 2018 and ICO Warning 2018. The main goal of these two warnings was to inform the public about existing risks of holding and investing in virtual currencies and ICOs. However, Bitcoin Communiqué was not denounced and it is still in force.

      In a nutshell, Luxembourg’s regulator is in constant contact with active digital money platforms that are already present or supervised, and VNX Exchage expects that the CSSF will continue to consider every new application under one of the possible existing licenses.

    • How is VNX Exchange team formed? menu arrow

      VNX Exchange team is a group of high-profiled international specialists with strong expertise in both VC and FinTech.

    • Is VNX Exchange hiring? menu arrow

      Yes, on a regular basis. For more detailed information please contact …