October 9, 2018
OTCXN, a blockchain-powered capital markets infrastructure company, announced that it has signed Kingdom Trust to serve as a neutral, third-party custodian of assets for trading entities and exchanges that use OTCXN technology to facilitate clearing and settlement of OTC block trades and cross-exchange trading. Kingdom Trust is the first regulated financial institution to offer qualified custody for digital asset investments like Bitcoin and Ethereum, with more than $12 billion in custody.
The biggest problem for institutions in the cryptocurrency space prior to OTCXN’s launch has been the lack of a clearing and settlement solution that eliminates trading counterparty and settlement risk while connecting all global liquidity providers and exchanges. OTCXN’s multi-custodian solution solves this problem and delivers global liquidity access with a single account at the preferred custodian of a trading desk or exchange. Kingdom Trust will play a key role in supporting the expansion of the OTCXN network by providing clients with safe and capital efficient access to this global liquidity through OTCXN’s market leading trading platforms.
“We are extremely pleased to have Kingdom Trust on board and using OTCXN’s Custodian Desk platform to support our mutual institutional clients that trade digital assets such as cryptocurrencies over OTCXN’s unique network. Kingdom Trust is one of only a few regulated US entities that offers stand-alone custody services in both Fiat and Cryptocurrencies. They stand out for their integrity, experience, state-of-the-art infrastructure and client asset protection,” stated Rosario M. Ingargiola, CEO and Founder of OTCXN.
Kingdom Trust is an independent qualified custodian with a decade of experience in the alternative asset space. As a regulated trust company, Kingdom Trust offers a regulatory compliant environment, including AML/KYC, for both domestic and international clients. Kingdom Trust takes a holistic risk management approach to its assets, combining robust segregation of responsibilities with cold storage, backed by insurance for assets held.
“By partnering with OTCXN, Kingdom Trust will be able to offer its clients the best of both worlds, i.e., the ability to 'trade hot, store cold.' The OTCXN platform, its network, and partners will offer the power of rapid liquidity to clients and markets where that has been in short supply. The combined solution leverages technology to eliminate counterparty and settlement risk, delivering benefits for all participants in the ecosystem. We are excited to play a role in this transformative approach,” said Matt Jennings, CEO of Kingdom Trust.
Unique Solutions for Custodians
OTCXN provides custodians with a proprietary blockchain-based solution for trading cryptocurrencies and other assets without counterparty and settlement risk. The solution allows custodians, at their clients’ request, to create blockchain ledger entries backed by their assets to the OTCXN platform. Once the assets are digitally reflected on the OTCXN network, they can be freely traded with any other counterparty on the network. The solution provides continuous net settlement reporting, with point-in-time snapshot features and workflow tools to support periodic net settlement movements between custodial accounts.
Unique Solutions for Institutional Trading Desks and Exchanges
Clients will access Trade Desk with an OTC Block Trading platform, which allows for institutional RFQ-based trading with any other counterparty on the network, all of whom have cleared applicable AML/KYC requirements. Trades on OTCXN execute as an atomic exchange of provable assets on the custodial blockchain ledgers in real-time, for instant clearing and settlement, with underlying assets held at the custodian, and crypto assets remaining in cold or deep cold storage. This approach to trading crypto assets that remain in cold storage, besides exponentially increasing transaction speeds, also minimizes information leakage for large OTC trades that would otherwise get recorded on the public Blockchain on a trade-by-trade basis.
Later this year, OTCXN will be launching its high-performance matching engine, LiquiMatch, as both a Dark Pool and Central Limit Order Book-style exchange for cryptocurrencies. Clients of custodians on the network will be able to access liquidity across all OTCXN trading platforms via a single account. In addition to handling native orders, LiquiMatch aggregates external exchange liquidity that is tradable without placing assets at the underlying exchanges.
OTCXN will also be introducing support for custom settlement times such as end-of-day or T+1 to support the needs of some of the largest liquidity providers. Additionally, OTCXN will be opening up its network to third-party credit and collateral providers that can provide leverage financing for institutional traders' positions, both long and short, through the provision of margin loans, coin repos, and other financial products.
OTCXN’s Solution Scales Crypto Markets
The OTCXN solution has strong appeal to custodians that hold crypto assets for institutional clients because the cryptocurrency is always held in deep, cold storage, rather than being held at an exchange or being in flight, as it is when traded over-the-counter. The OTCXN approach significantly increases safety for institutional clients and reduces administrative overhead for custodians with clients engaged in active trading. An immutable record of all transactions on a proprietary blockchain layer brings transparency and provability to facilitate the audit, fund administration and regulatory requirements of institutional clients.
“What we have created is an institutional-grade Layer 2 network, like Lightning Network, except that it operates across all crypto assets and at institutional scale and capacity,” says Ingargiola. “You simply cannot scale the crypto markets to institutional levels without removing public ledger transactions from the real-time trading critical path. OTC trades between counterparties on opposite ends of the globe are done, cleared and settled in less than a second – 1,000’s of times faster than any other platform and without any initiator risk,” said Ingargiola.
“Current crypto exchanges are true islands of liquidity that OTCXN bridges for the first time by facilitating cross-exchange trading, clearing and settlement via a single account at a custodian on the network. The technology that makes this possible eliminates holding assets at each underlying exchange, removing counterparty risks and capital inefficiencies that represent barriers to institutional adoption, as well as scaling institutional trading volumes,” added Ingargiola.
Any exchange can join the OTCXN network by placing a portion of client assets at a custodian such as Kingdom Trust.
OTCXN previously announced that it had completed the world’s first live trades of digitized US dollars for digitized Bitcoin, which cleared and settled instantly as an atomic exchange of assets with no initiator risk to either party, and where the underlying assets were held by a third-party, neutral custodian.
OTCXN is a capital markets infrastructure company using asset digitization, proprietary blockchain technology, real-time collateral management and an array of institutional trading platforms to organize global liquidity and make it tradable via a single account at a custodian on the network. OTCXN has developed the first technology platform that eliminates counterparty and settlement risk without the use of balance sheet and credit, and without becoming a counterparty to transactions. For more information, visit www.otcxn.com and @OTCXN.