Institutional Crypto Custody, Subaccounts, and Off-Exchange Settlement
Summary
This document explains how institutions can separate custody, execution, and internal account management when trading crypto through an exchange. It distinguishes standard exchange accounts, which record balances on the venue’s internal ledger, from operational subaccounts, independent custody, third-party custody, and off-exchange settlement. Subaccounts can divide strategies, permissions, and risk limits, but they do not by themselves establish external or legal segregation of the underlying assets.
Off-exchange arrangements are presented as a way to leave collateral with a custodian while using corresponding balances to trade on an exchange. The article names several providers and describes examples involving Fireblocks, Copper, and OSL. It also discusses separate custody arrangements for tokenized stock products and cites reserve reporting. These structures can affect counterparty exposure, but their protections depend on contracts, collateral rules, custodians, and account arrangements. The article is a platform-focused overview, not independent due diligence; it includes provider-reported figures and claims that institutions should verify against current documentation. Proof of reserves is correctly distinguished from custody segregation: evidence of reserve coverage does not alone show how client assets are legally or operationally held.
Key ideas
- Standard exchange balances are recorded on an internal ledger and are distinct from assets held by an external custodian.
- Subaccounts help separate strategies, permissions, and risk controls, but are not equivalent to custody segregation.
- Off-exchange settlement can combine external custody with exchange execution, subject to the specific collateral arrangement.
- Proof of reserves addresses reported asset coverage and does not by itself establish client fund segregation.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.