- OKX has partnered with Standard Chartered to launch a regulated crypto collateral mirroring program for institutional clients.
- The initiative allows clients to keep custody of their assets with Standard Chartered, complying with Dubai’s VARA regulations.
- The move addresses institutional concerns over crypto custody risks, offering a safer, regulated framework through a globally trusted bank.
Crypto exchange OKX has announced a partnership with global banking giant Standard Chartered. Revealed on Thursday, April 10, the collaboration backed by prominent financial entities Brevan Howard and Franklin Templeton introduces a new collateral mirroring program aimed at enabling institutional clients to use cryptocurrencies as collateral within a regulated framework.
Under the newly launched pilot program, institutional participants will be able to retain custody of their collateral assets with Standard Chartered, rather than transferring them to OKX. The crypto exchange will then mirror these assets into the clients’ trading accounts, thereby avoiding direct custody of the funds.
VARA-Compliant Custody Framework Backed by Standard Chartered
The initiative is being rolled out in alignment with the regulations of Dubai’s Virtual Asset Regulatory Authority (VARA). As part of this framework, Standard Chartered will assume the role of a regulated custodian, operating within the Dubai International Financial Centre (DIFC) and under the supervision of the Dubai Financial Services Authority (DFSA).
According to OKX, “Standard Chartered acts as the independent, regulated custodian in the Dubai International Financial Centre (DIFC), regulated by the Dubai Financial Services Authority, ensuring the safe storage of the assets used as collateral.”
The launch comes amid rising institutional interest in crypto trading. For instance, the daily average volume of CME Group’s crypto futures market increased by 73% in 2018. Though it has been growing, there are still very few institutional players who have been reluctant to place their digital assets into crypto exchanges’ custody for their security, hacking risks, and the risk of insolvency—both those being increased prominent during the FTX collapse.
The presence of crypto exchanges that do not face much regulatory oversight compared to traditional financial institutions is the reason for this hesitancy. This has therefore led to the demand for solutions that reduce the counterparty risk without giving up on trading access. This challege of moving assets in the secondary market is addressed by the collateral mirroring program that enables institutions to maintain their funds in a globally recognized and highly regulated banking institution as in the case of Standard Chartered.
Strengthening Trust with G-SIB Custody and Regulatory Safeguards
Standard Chartered is also designated as a Globally Systemically Important Bank (G-SIB) and needs to be regulated by strict global financial regulations. Client assets are segregated from the bank’s own balance sheet in the unlikely event that the bank is in financial distress, giving yet another level of protection.
OKX also wants to be the bridge between the trust gap between institutional investors and crypto markets, and the company aims to be aligned to global regulatory standards and provide a healthier, more transparent way for digital asset trading.
