EDX Markets reportedly drops Paxos as planned custodial partner

EDX Markets, a nascent crypto trade supported by Charles Schwab, Constancy, and Citadel Securities, has reportedly ended its meant affiliation with Paxos and is nearing an settlement with Anchorage Digital, in response to Bloomberg.

Beforehand, EDX Markets had introduced a partnership with Paxos in October of final yr. The New York-based blockchain agency, recognized for issuing Binance stablecoin BUSD, would have served because the custodian for EDX’s purchasers’ crypto belongings whereas additionally offering direct EDX entry to Paxos prospects. This plan has now been deserted.

Anchorage Digital, primarily based in San Francisco, is a US crypto custodian that possesses a financial institution constitution from the Workplace of the Comptroller (OCC). Regardless of criticism from the OCC in 2021 concerning the absence of key anti-money laundering controls, the corporate agreed to make obligatory corrections. Anchorage, valued at over $3 billion following a funding spherical in 2021, diminished its employees by roughly 20% in March.

EDX’s CEO, Jamil Nazarali, said final week that the corporate is cooperating with a third-party custodian, however declined to call the brand new associate. Each EDX Markets and Anchorage Digital selected to not touch upon the matter.

EDX’s web site at the moment lists Anchorage as a associate, although Paxos is notably absent. A Paxos spokesperson commented, “EDX shifted to concentrate on a non-custodial providing at launch. We’re very enthusiastic about what EDX is constructing, and we hope to assist EDX prospects with our regulated custody when banks and brokers onboard to the platform.”

The selection of a custodian for EDX is important as a result of trade’s non-custodial mannequin, which contrasts with present crypto platforms corresponding to Coinbase and Binance Holdings Ltd. by not holding purchasers’ digital belongings throughout transactions.

Paxos’ regulatory points

Paxos has confronted regulatory scrutiny from a number of instructions within the final yr. New York State ordered Paxos to halt issuing its Binance-branded stablecoin, BUSD, in February. Moreover, Paxos obtained a Wells discover from the US Securities and Alternate Fee in February, signaling that the regulator was investigating the agency and contemplating litigation.

Paxos has disputed these prices and indicated its willingness to defend itself in court docket. In the meantime, an SEC official alleged that Binance, a number one cryptocurrency trade, despatched almost $20 billion in commingled funds to Paxos in 2021 via Benefit Peak Ltd., a buying and selling agency. Up to now, the SEC has not filed prices.