Standard Chartered Launches Crypto Collateral Pilot in Dubai

Standard Chartered, a prominent global banking institution, has initiated a pilot program in collaboration with cryptocurrency exchange OKX. This innovative platform enables institutions to utilize tokenized funds and cryptocurrencies as collateral for trading purposes. The pilot is being conducted in the Dubai International Financial Centre, under the supervision of the country’s Virtual Asset Regulatory Authority, ensuring compliance with local regulations.

The platform operates on a collateral mirroring setup, which allows institutions to leverage crypto and tokenized money market funds for trading without the need to store their assets on an exchange. This setup enhances security and regulatory compliance by keeping the assets securely custodied with Standard Chartered, a globally systemically important bank (G-SIB). The process involves "mirroring" the collateral off-exchange, enabling efficient capital deployment in crypto markets while mitigating counterparty risks associated with on-exchange holdings. OKX, through its Dubai-regulated entity, facilitates the transactions, while Standard Chartered manages the custody under the DIFC’s framework.

Tokenization is a pivotal component of this model, transforming traditional money market funds into blockchain-based assets. This transformation facilitates faster settlements, greater transparency, and real-time asset movement. According to OKX President Hong Fang, the platform will provide institutional clients with a trusted environment to deploy trading capital at scale. The pilot program will include participation from leading names in traditional finance, with US-based asset manager Franklin Templeton being the first in a series of money market funds offered under the OKX-SCB program. Additionally, Brevan Howard Digital, the crypto division of global investment firm Brevan Howard, will be among the first institutions to participate in the pilot.

Standard Chartered has been actively involved in the tokenization sector for several years. The bank has supported various blockchain initiatives, including Partior and Zodia Markets, and has tested tokenized deposits and digital custody solutions across multiple markets. In late 2023, SC Ventures, the fintech investment arm of the banking group, launched Libeara in Singapore alongside FundBridge Capital. This platform allows for the creation of a tokenized Singapore dollar government bond fund for accredited investors. In February of this year, China Asset Management Hong Kong collaborated with Standard Chartered to issue one of the first tokenized money market funds in Asia on Libeara, targeting retail investors. Additionally, Liberia debuted the Delta Wellington Ultra Short Treasury On-Chain Fund, a tokenized US treasury fund. Beyond tokenization, Standard Chartered has established a significant presence in the digital asset custody space, with operations spanning multiple jurisdictions.