Today Seychelles-based OKX, the fourth largest cryptocurrency exchange, announced it selected Standard Chartered as its third party crypto custodian for institutional clients. The bank unveiled its digital asset custody offering in the UAE last month.
This may be the first time that a systemically important bank (G-SIB) has directly provided crypto custody for a major crypto exchange. OKX says it believes this will enhance institutional engagement in digital assets. Standard Chartered also founded a standalone crypto custody firm Zodia Custody, in collaboration with Northern Trust. Japan’s SBI and Australia’s NAB are also Zodia Custody investors.
“We selected Standard Chartered as an institutional custodian partner to enhance our offering and accelerate the integration of digital assets within the traditional financial ecosystem,” said OKX Global Chief Commercial Officer Lennix Lai.” Standard Chartered’s extensive global banking expertise and unwavering commitment to security aligns with our objective to provide exceptional crypto services and reinforces the confidence of our institutional clients in managing their digital assets.”
Earlier this week we published an article about Standard Chartered’s DLT endeavours, including custody and a DLT-based transfer agency system.
With the collaboration, OKX is giving institutional clients the option of separating trading from custody, although its institutional service already provides OKX custody. It also enables “advanced trading features and risk management tools”.
Our biggest impression of OKX was around the Terra/Luna collapse, because the exchange has proper risk monitoring systems. When it noticed some volatility in the Anchor Protocol associated with the Terra stablecoin, it redeemed the principal and pool rewards for all its clients before the stablecoin’s full de-peg event occurred. Hence, clients received around 99 cents for the stablecoin, compared to most people that had significant losses.
Regulatory scrutiny
While OKX has attracted less controversy than some other cryptocurrency exchanges, it is not immune to regulatory scrutiny. That’s especially because it has chosen the Seychelles as its global headquarters. It doesn’t serve the United States. Some of the jurisdictions it has withdrawn from include Nigeria, India and Hong Kong, the latter being an important region for Standard Chartered. In order to comply with Europe’s MiCAR, OKX chose Malta as its European base. We believe it previously had Maltese headquarters, after moving from its first base in Beijing. In fact, Changpeng Zhao, the founder of Binance, was CTO of OKX before he launched his own exchange.
However, a quick scan of the internet will throw up negative stories of OKX in the 2018/2019 period, including allegations of lax verification requirements and wash trading, which were quite widespread at the time. One person commented that OKX managed to “hang around long enough to bring the grown-ups in.”
