(Reuters) – London Stock Exchange Group (L:LSE) said on Tuesday Hong Kong-based AAX would use its technology for cryptocurrency trading, allowing the British exchange operator enter a nascent yet highly speculative industry.

The AAX exchange, which is backed by Atom Group, a fintech firm focused on blockchain technology and emerging digital assets, will use LSE's Millennium Exchange matching system, LSE said in a statement.

The deal, however, comes at a time when cryptocurrency exchanges in Asia face scrutiny and policymakers have warned about the risks of speculative investments in cryptocurrencies.

Online platforms where virtual currencies such as bitcoin can be bought and sold by individuals operate with lower safeguards than traditional financial markets and are vulnerable to market manipulation.

Cryptocurrency exchanges and traders in Asia are also struggling to insure themselves against the risk of hacks and theft, a factor they claim is deterring large fund managers from investing in a nascent market yet to be embraced by regulators.

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