The first generation of bitcoin exchanges may have been a slapdash effort. Hacks, DDoS attacks, and regulatory challenges saw many of them fall by the wayside, sometimes taking customers' bitcoins with them.

But a second generation of exchanges hopes to provide a smooth, safe, and most importantly, compliant experience for customers. One of these is CoinX, a US-based exchange serving customers both at home and abroad.

Megan Burton

, founder of the company, explains that the founding team has invested over $1 million in the venture, which is currently in private beta.

She emphasizes the security of her exchange, and its regulatory compliance.

Burton has a 15-year background in IT security. She has been CEO of specialist security and IT services firm SeeGee Technologies since 2004, and worked at Logicalis and Dimension Data before that.

An encrypted database and application firewalls are two of the features that she discusses when talking about the security of the system.

She also hosts the service at the same facility used by "a major exchange", which she won't reveal, but which others say is the New York Stock Exchange (NYSE).

The service, which launched at the Money 2020 exhibition late last month, targets institutional investors, says Burton. "We are seeing more players who are in the alternative trading systems, or in the broker dealer market, or in the institutional investor side."

Having said that, the company is not tailoring its pricing for institutional investors, particularly. There will not be any maker-taker options, for example, as there are with recently-launched UK site Coinfloor, or as New York-based Coinsetter (also in private beta) is planning.

CoinX takes a traditional approach, setting a sliding fee scale based on volume ranges. 500 bitcoins or under (we are assuming on a 30-day trading average - the site didn't say) gets you a 0.3% trading fee. That falls to 0.1% for trading volumes between 100,000 and 150,000 bitcoins.

CoinX operates in three currencies: US dollars, euros, and pounds sterling (Burton has registered the exchange with the UK's Financial Conduct Authority).

There are no direct deposit options for non-US users, however, and the company is not taking advantage of SEPA, the European direct payment network. Instead, users outside the 50 states will be limited to wire transfers for the time being. Why?

Burton admits that serving US customers can leave international banks sensitive to potential regulatory issues.

"They have a lot of regulatory pressure from the US. We are US citizens, and a US-based organisation, and the international community takes a little caution when dealing with US citizens who are heavily regulated," she says. Coinfloor, conversely, locked out US customers while it focused on the UK market.

Back home, CoinX is grappling with regulatory challenges on the ground, and is not operational in all 50 states yet. FinCEN registration was easy, Burton says. It’s state-level compliance that takes time.

"Each state has different guidelines and definition as to what money is. The definition of transmission varies state by state, but our goal at CoinX has been to be a compliant exchange.” So, she’s working through them one by one.

At the time of writing, the company has "more than half" of the US states on its books, and has been in active negotiations with many more, although Burton says that it can take 18 to 24 months to work through an individual state's regulatory process.

The three prize states – California, Texas, and New York – are not on her list of available locations for customers. They make up 25% of the country's population. She is preparing for a meeting with the California regulator on November 19, though.

There may be an alternative to money services business status in some states, muses Burton.

"It would be along the lines of selling a good and being the holder of that good," she says. "We still have to apply to the state and ask them for a no-action, or ask them where it sits within the regulatory guidelines."

In some states, the company will not be viewed as a money transmission business, she says. Eventually, CoinX’s services are likely to look different depending on what state a customer is in.

The other challenge for exchanges today is developing solid banking relationships. This is one nut that Burton claims to have cracked, at least in the US.

CoinX has five banking partners, she says, three of which are nationwide US banks, and the other two which are smaller specialist banks. Between them, they offer a mixture of services such as international banking and automated clearing house (ACH) capabilities.

CoinX is hoping for a public launch sometime within the next 30 days, says Burton.

Hopefully, it will also be in significantly more states by the end of the year. Launching with a subset of available states will enable CoinX to get out in the market early and remain compliant, even as it negotiates its way through the rest of the USA.