New exchange EDX reportedly switching out Paxos’ custody services for Anchorage’s
The new exchange does not custody customer funds itself to avoid conflict of interest – and a hot-button issue with the SEC.
EDX, a cryptocurrency exchange launched a week ago with the backing of tradfi heavyweights such as Citadel Securities, Fidelity Digital Assets and Charles Schwab, is reportedly preparing to switch custody providers, dropping Paxos Trust in favor of Anchorage Digital. EDX has a noncustodial business model designed to remove conflicts of interest.
EDX supports trading in four cryptocurrencies – Bitcoin (BTC), Ether (ETH), Litecoin (LTC) and Bitcoin Cash (BCH). At the time of writing, BCH had risen 70.43% in the week since EDX began operating, and 101.36% in the last month.
EDX announced its partnership with Paxos to “facilitate the custody and wallet infrastructure of digital assets” in October, shortly after the launch of the exchange was announced. The United States Securities and Exchange Commission has since announced a proposal for stricter custody rules for crypto firms. A Paxos spokesperson told Cointelegraph:
“EDX shifted to focus on a non-custodial offering at launch. We are very excited about what EDX is building, and we hope to support EDX customers with our regulated custody when banks and brokers onboard to the platform.”
Blockchain infrastructure platform Paxos holds a so-called BitLicense from the New York Department of Financial Services. That agency was reported to be investigating Paxos earlier this year for an unspecified reason. Paxos was granted “preliminary conditional approval” for US bank charter from the United States Comptroller of the Currency (OCC) in 2021, but that approval reportedly expired at the end of March.
Related: Prometheum subsidiary receives FINRA approval for digital asset qualified custody
Anchorage Digital was the first crypto firm to receive a national trust bank charter from the OCC in January 2021. It ran afoul of that regulator a year later for Anti-Money Laundering (AML) deficiencies and agreed to a consent order. Shortly after that, Anchorage Digital formed a custody network with crypto exchanges Binance.US, CoinList, Blockchain.com, Strix Leviathan and Wintermute.
1/ EDX Markets, a non-custodial exchange, went live today.
That sounds like a contradiction right?
Here’s background on EDX and initial thoughts. pic.twitter.com/cPqARF5BmG
— Ram Ahluwalia, higher for longer crypto CFA (@ramahluwalia) June 20, 2023
EDX plans to introduce EDX Clearing, a clearinghouse to settle trades executed on the EDX Markets platform, later this year. EDX declined to comment on the matter of its custody provider, and Anchorage Digital did not respond to a request for comment.
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