EDX Markets, a crypto exchange backed by Charles Schwab, Fidelity, and Citadel Securities, has reportedly terminated its planned collaboration with Paxos and is now close to finalizing an agreement with Anchorage Digital, according to Bloomberg. In October of last year, EDX Markets had originally announced its partnership with Paxos. Paxos, a New York-based blockchain firm known for issuing the Binance stablecoin BUSD, was expected to act as the custodian for the crypto assets of EDX’s clients while also granting EDX access to Paxos customers. However, EDX has now decided to abandon this plan and pursue a new partnership with Anchorage Digital.
Anchorage Digital: A US Crypto Custodian with a Bank Charter
Anchorage Digital, based in San Francisco, is a US crypto custodian that holds a bank charter from the Office of the Comptroller (OCC). Although the company faced criticism from the OCC in 2021 due to the lack of essential anti-money laundering controls, it agreed to make the necessary corrections. In a funding round last year, Anchorage Digital’s value reached over $3 billion. However, the company experienced a workforce reduction of approximately 20% in March.
EDX’s CEO, Jamil Nazarali, recently mentioned that the company is working with a third-party custodian but refrained from disclosing the new partner’s name. Both EDX Markets and Anchorage Digital declined to comment on the matter. Notably, EDX’s website currently lists Anchorage as a partner while Paxos is absent. A spokesperson from Paxos stated that “EDX shifted its focus to a non-custodial offering upon launch” and expressed excitement about supporting EDX customers with regulated custody when banks and brokers join the platform.
The Significance of Choosing a Custodian for EDX
The choice of a custodian is crucial for EDX due to its non-custodial model, which distinguishes it from established crypto platforms like Coinbase and Binance Holdings Ltd. Unlike these platforms, EDX does not hold clients’ digital assets during transactions. Therefore, selecting a reliable custodian is of utmost importance.
Paxos has faced regulatory scrutiny from various sources over the past year. In February, the state of New York ordered Paxos to cease issuing its Binance-branded stablecoin, BUSD. Additionally, Paxos received a Wells notice from the US Securities and Exchange Commission (SEC) during the same month, indicating that the regulator was investigating the company and considering legal action. Paxos has refuted these allegations and expressed its willingness to defend itself in court. Meanwhile, an SEC official claimed that Binance, a leading cryptocurrency exchange, sent nearly $20 billion in commingled funds to Paxos in 2021 through Merit Peak Ltd., a trading firm. However, the SEC has not yet filed any charges against either Paxos or Binance.