A Tripartite Custody and Collateral Model for Institutional Crypto Trading
Summary
The document explains a tripartite arrangement involving an exchange, an asset manager, and an independent custodian to address institutional crypto counterparty risk. Under the described structure, the client’s assets remain with the custodian while mirrored collateral values support trading on the exchange. Legal agreements define the parties’ rights and responsibilities, including arrangements for collateral and account control.
It outlines four operational concerns: the limits of conventional off-exchange custody, the security and mobility of digital assets, uncertainty around asset recovery, and fragmented onboarding and trading operations. Two settlement approaches are described: collateral values are reconciled when risk limits are triggered, or margin and trading settlements are handled during the day. API connectivity supports ongoing operations. The article is written from the participating exchange’s perspective and promotes its own service; it provides no independent evidence on performance, costs, legal outcomes, or how the structure would function in a default. The arrangement’s protections depend on contract terms, custody operations, and applicable law.
Key ideas
- The proposed structure keeps client assets with an independent custodian while enabling exchange trading through mirrored collateral.
- Legal agreements set out collateral, account control, and party responsibilities.
- The article describes risk-triggered collateral reconciliation and intraday settlement as two operating modes.
- Off-exchange custody can constrain liquidity, instrument access, and capital efficiency.
- The arrangement is presented by a participating provider and is not accompanied by independent performance or legal-outcome evidence.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.