Our 2023 Roadmap For Institutional Custody

At OKX, our focus is to offer our institutional clients more transparency and more control over their funds, while balancing capital efficiency, cost, and security. Together with clients and industry stakeholders, we're expanding our custody solutions to better serve the needs of institutions.

Our roadmap for institutional custody follows five major directions, allowing clients to choose the solutions that work best for them:

  • Exchange custody solutions

  • Affiliated regulated custody and wallet solutions

  • Partnerships with regulated custodians

  • Off-exchange settlement solutions

  • Self-custody solutions

1. Exchange custody solution

Our exchange custody offering rests on full reserves, secure wallets, and capital-efficient trading solutions.

A. Proof-of-reserves

While keeping assets in custody on an exchange, it's important to make sure the funds are properly stored and segregated. That's why we publish a monthly proof-of-reserves audit, which covers not only the assets we hold in reserve but also the liabilities credited to our customers. By using a Merklee-tree proof-verification technique, our clients can verify that we hold their assets 1:1 in wallets we control. But we don't want you to take our word for it, we want you to verify. So we've built an open source tool for clients to audit our solvency for themselves. And if they don't trust this open source tool – they can also use any other third-party or even build their own in just a few steps.

Learn more about our proof-of-reserves audit.

B. Security

If you look at our Nansen dashboard you'll see most of our reserves haven't moved since September 2021 – this is because 95% of our assets are stored in cold-storage for maximum security.

If you want to learn more about our security set-up and how we secure our clients' funds using a combination of cold and hot wallets, read more.

C. Capital efficiency

Our mission is to make sure that our clients can use their working capital as efficiently as possible while it stays on our platform. We've developed two types of tools to achieve this goal:

Unified Account

Users can trade all instruments (spot, perpetuals, futures, and options) using one single account and have better risk management. Different options are available depending on trading needs:

  • Simple Account mode is best suited for traders who trade spot and options only.

  • Single-currency margin mode is best for margin and derivatives traders who have an intermediate level of trading experience.

  • Multi-currency margin mode is best for professional, API, and institutional traders trading all instruments on pooling net equity and unrealised P&L.

  • Portfolio Margin mode is best for these same pro, API, and institutional traders who want to trade all instruments grouped by risk unit.

Margin and loans

On the margin and loans front, we're offering three main services: Auto-borrow function: Using this function, clients will be able to borrow assets delivered to the borrower's trading account immediately, allowing them to trade on margin with borrowed assets.

  • VIP Loan Pool: This program allows VIP clients to optimize their leverage, at stable and predictable interest rates all within the scope of our risk engine methodologies.

  • Post-trade settlement: Finally, we're considering developing a post-trade settlement solution for institutional clients.

2. Affiliated regulated custodians and wallet solutions

We are currently developing affiliated regulated custodian and wallet solutions. We will keep our clients informed of these developments by the end of Q1.

3. Third-party regulated custodians for on-exchange settlement

In addition to these affiliated solutions, OKX is also considering partnerships with regulated custodians. Traditional financial institutions, in particular, are developing technology leveraging legal structures that are well-known in the world of finance, utilising trust and security interest based solutions, involving escrow accounts where clients can hold collateral securely. We're hoping to update our clients about these discussions by the end of Q1.

4. Off-exchange settlement solutions

In traditional finance, exchanges do not facilitate every single aspect of the trade life cycle. There are dedicated clearing, settlement, and custody agents precisely to help reduce counterparty risk in the trading workflow. In crypto, such intermediaries are still emerging. Their goal is reduce market timing and counterparty risks with cryptographical solutions. The most technologically advanced settlement solutions allow mirroring asset balances in one's own custody to make them available on a trading account without the need for custodial order pre-funding. We're hoping to be able to share more about the status of these discussions soon.

5. Self-custody solutions

Finally, some clients may want to take custody of assets themselves. We already offer this capability with the OKX Wallet, our self-custodial, multi-platform (mobile/web/extension), interoperable, and multi-chain wallet

This solution might be better suited for individual traders, however. To support the needs of institutions, we are also exploring the development of dedicated institutional addresses, allowing clients to:

  • Secure their assets in a dedicated address, segregated from the OKX reserves.

  • View and track their address balance in real-time on the blockchain.

  • Use their own private keys to manage your institutional address in a self-custodial way.

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THIS ARTICLE IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. IT IS NOT INTENDED TO PROVIDE ANY INVESTMENT, TAX, OR LEGAL ADVICE, NOR SHOULD IT BE CONSIDERED AN OFFER TO PURCHASE, SELL, OR HOLD DIGITAL ASSETS. DIGITAL ASSETS, INCLUDING STABLECOINS, INVOLVE A HIGH DEGREE OF RISK, CAN FLUCTUATE GREATLY, AND CAN EVEN BECOME WORTHLESS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING OR HOLDING DIGITAL ASSETS IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. PLEASE CONSULT YOUR LEGAL/TAX/INVESTMENT PROFESSIONAL FOR QUESTIONS ABOUT YOUR SPECIFIC CIRCUMSTANCES.

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