Standard Chartered and OKX, supported by Franklin Templeton and Brevan Howard, are working on a solution that will enable institutional entities to use digital assets and tokenized money market funds as collateral for over-the-counter (OTC) trading.
Multinational financial corporation Standard Chartered and crypto exchange OKX announced the launch of a collateral mirroring solution for digital assets. As part of the solution, Standard Chartered will act as the independent custodian, while OKX, through its licensed structure, will manage the collateral process.
Collateral mirroring is a technology where assets are stored with a trusted custodian, but their “mirrored” representation is used as collateral on another platform. This enables trading or transactions without the need to move the actual assets.
The pilot launch will take place in the Dubai International Financial Centre (DIFC), in accordance with the regulatory framework of the Virtual Assets Regulatory Authority (VARA) and under the supervision of the Dubai Financial Services Authority (DFSA).
As of September 2024, Standard Chartered managed assets worth $650 billion in AUM, placing it among the global systemically important banks (G-SIBs). The use of its infrastructure for asset storage increases both the security and efficiency of capital. Institutional investors will thus have the opportunity to use cryptocurrencies and tokenized money market funds as collateral for trading outside traditional exchanges.
The first institutional user of the solution will be American asset management company Franklin Templeton. The plan is to test the use of tokenized shares of the Franklin OnChain US Government Money Fund (FOBXX) as collateral. The solution will also be tested by the digital division of European company Brevan Howard Digital, which specializes in hedge fund management.
According to Hong Fang, President of OKX, collaboration with one of the world’s largest custodians will not only enhance user trust but also take the entire crypto industry to the next level. Ryan Taylor, CAO of Brevan Howard Digital, also emphasized the importance of involving major and respected market participants in building infrastructure for the further adoption of digital assets by institutional investors.
Recently, the Depository Trust Clearing Corporation (DTCC) introduced a new blockchain solution for using tokenized assets as collateral in traditional finance markets.
