EDX Markets Takes a New Path, Explores Anchorage Digital as Custodial Partner

Updated: 25 July 2023

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EDX Markets, the recently launched cryptocurrency exchange backed by prominent finance leaders, has made a significant change in its partnership arrangements.

The exchange Shifts Custodial Partnership, Explores Collaboration with Anchorage Digital

EDX Markets has reportedly severed ties with Paxos as its custodian. Rumours indicate that EDX is now in final negotiations with Anchorage Digital to fill this crucial role. Official confirmation from both parties is awaited.

The decision to sever ties with Paxos comes as a surprise, considering the initial plans for the company’s involvement. Paxos was intended to serve as the custodian for EDX’s clients’ cryptocurrency assets, providing direct access to the exchange.

However, the launch of EDX Markets saw a shift in focus toward a non-custodial offering. A spokesperson from Paxos expressed excitement about EDX’s new direction and expressed hope for future collaboration once banks and brokers join the platform.

Anchorage Digital, a US-based crypto custodian with a bank charter from the Office of the Comptroller, is now expected to take on the role of custodian for EDX Markets. The details of the potential partnership have not been officially disclosed by either party.

EDX Markets’ primary objective at this stage is to select a suitable custodian. The exchange has emphasized the importance of ensuring that customer assets are held securely by a trusted third-party company.

Since its launch on June 20, EDX Markets has enabled trading services for four leading cryptocurrencies: Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), and Litecoin (LTC).

Both Paxos and Anchorage Digital have encountered their fair share of challenges recently. Paxos, the issuer of stablecoins BUSD and USDP, reportedly faced an investigation by the New York State Department of Financial Services (NYSDFS) earlier this year.

EDX Markets, a recently launched crypto exchange backed by firms including Citadel Securities, Fidelity Digital Assets and Charles Schwab, has dropped its plan to use Paxos as a custodian https://t.co/uTzEgjxmxU

— Bloomberg (@business) June 27, 2023

Although the exact reasons for the investigation remained unclear, Paxos announced its decision to stop minting new BUSD tokens in compliance with regulatory guidance.

Anchorage Digital also faced regulatory issues with the Office of the Comptroller, resulting in a consent order in 2022 that highlighted shortcomings in its anti-money laundering program.

Additionally, like many other crypto firms, Anchorage Digital had to downsize its workforce, letting go of 75 team members in March due to the challenging market conditions.

EDX Markets’ recent partnership changes have generated significant interest within the cryptocurrency community. The exchange, backed by notable players such as Charles Schwab, Fidelity, and Citadel Securities, originally announced its collaboration with Paxos in October of the previous year.

Significant Move For EDX Markets

The decision to move away from this partnership in favour of Anchorage Digital marks a strategic shift for EDX Markets.

Anchorage Digital, with its established position as a US crypto custodian and recent valuation of over $3 billion, brings valuable expertise and credibility to the table.

While both EDX Markets and Anchorage Digital have chosen not to comment on the potential partnership, Anchorage is already listed as a partner on EDX’s website, while Paxos is conspicuously absent.

EDX’s CEO, Jamil Nazarali, revealed last week that the exchange would be working with a third-party custodian but refrained from disclosing the new partner’s identity.

This move aligns with EDX’s non-custodial model, which distinguishes it from other crypto platforms such as Coinbase and Binance Holdings Ltd., as it does not hold clients’ digital assets during transactions.

Paxos’ recent regulatory challenges, including the halting of BUSD issuance and the SEC’s investigation, have undoubtedly influenced EDX Markets’ decision to reconsider its custodian partnership.

As EDX continues to establish itself in the competitive cryptocurrency market, the choice of a reliable custodian becomes crucial for maintaining customer trust and safeguarding digital assets.

The emerging partnership between EDX Markets and Anchorage Digital represents a notable advancement within the cryptocurrency industry. This transition away from Paxos and the exploration of a fresh alliance exemplifies EDX’s dedication to evolving and meeting client demands in a dynamic industry.