OKX is partnering with Standard Chartered to enable institutional clients to use crypto as collateral in a regulated way.
OKX (OKB) is boosting its offering for institutional clients. On Thursday, April 10, a crypto exchange partnered with Standard Chartered, with backing from Brevan Howard and Franklin Templeton, to launch a collateral mirroring program.
This program will enable institutional clients to keep their collateral with Standard Chartered, instead of with OKX. The exchange will then “mirror” this collateral into their accounts, without ever taking custody of the funds.
The program launched as a pilot, complying with Dubai’s Virtual Asset Regulatory Authority (known as VARA) regulations. Standard Chartered will serve as a custodian under that framework, supervised by Dubai’s financial regulators.
“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,” OKX
Why OKX offers Standard Chartered custody
There is growing demand among institutions for crypto trading. For instance, CME Group reported a 73% increase in the daily average volume of its crypto futures market. However, these institutional clients don’t trust crypto exchanges with custody of their funds.
For instance, exchanges run a risk of hacking and bankruptcy, like in the case of FTX. This, in turn, exposes institutional clients to counterparty risk, potentially leading to billions in losses.
At the same time, regulations for crypto exchanges are typically less stringent than those for banks or other financial institutions. For this reason, collateral mirroring enables institutions to safeguard their funds with a trusted party.
What’s more, Standard Chartered is a Globally Systemically Important Bank, meaning it falls under some of the strictest regulations in financial markets. User funds are segregated from the bank’s balance sheet, ensuring they are protected even if Standard Chartered encounters financial difficulty.
