EDX Markets Seeks New Custody Partner, Ends Agreement With Paxos: Report
The earlier agreement with Paxos, announced last October, would have directed the exchange’s clients to Paxos for custody of crypto assets and allowed Paxos customers direct access to EDX. However, EDX Markets has now shifted to a non-custodial model, meaning it will not hold clients’ digital assets during trading. This is in contrast to existing crypto platforms such as Coinbase Global Inc. and Binance Holdings Ltd., which do hold clients’ digital assets.
EDX’s decision to find a new custody partner is critical to the exchange’s success. CEO Jamil Nazarali said that EDX is already working with a third-party custodian, but did not disclose the new partner’s name. The exchange’s focus on a non-custodial model is in line with criticism from SEC Chair Gary Gensler, who has criticized existing crypto platforms for failing to separate different parts of their businesses, such as custody, market-making, and trading, which could result in conflicts of interest.
Anchorage Digital, the new partner EDX is in talks with, is a US crypto custodian with a bank charter from the Office of the Comptroller. It is already listed as one of the vendors and partners on EDX’s website, whereas Paxos is not on the list. However, Anchorage Digital has had its own issues with compliance. The OCC stated last year that Anchorage did not have key money-laundering controls in place and that its compliance program lacked staff and internal processes to verify customers in 2021. Anchorage Digital agreed to correct the issues.
The move away from Paxos comes as the company received a Wells notice from the US Securities and Exchange Commission in February, alleging that Paxos should have registered with the regulator regarding the issuance of a Binance-branded stablecoin called BUSD. Paxos has said it disagrees and is prepared to litigate if necessary.
DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.