OKX, which is the second-largest cryptocurrency exchange in the world by trading volume has hired digital asset storage company Komainu. This allows institutional users to store their crypto with the Nomura-backed custodian, while still using the funds to trade at the exchange.

This partnership demonstrates that vertically integrated crypto-exchanges can begin to mimic traditional finance by segregating their operations with third party custodians in an attempt to avoid another FTX crash.

OKX has become the first client of KomainuConnect. This is a settlement and custody system that provides 24/7 trading, cold storage, and a combination of multiparty computations (MPCs) and hardware security module (HSMs).

Lennix Lei, OKX’s chief commercial officer, told CoinDesk by email that funds deposited into a Komainu custodial wallet were transferred to a Komainu Collateral wallet and linked to an OKX Account. The OKX account reflects the balance, allowing active trading on OKX’s 700+ spot and derivatives market.

Sebastian Widmann, Komainu’s head of strategy and head of strategy for the Connect Collateral wallet, explained that it is linked to a tri-party institutional account change agreement.

Widmann stated in an interview that there is a triparty agreement between Komainu, the custodian, OKX, the liquidity provider and venue, and Komainu’s client as a client of OKX. This allows Komainu’s client to trade on the exchange directly with Komainu handling settlement requirements.

Lai, a Komainu representative, said that the assets transferred from OKX to Komainu were “significant”, and are expected to increase as both firms expand their institutional products.

We believe that the more options users have the better. Lai stated that “we are offering balance mirror custody on-exchange solutions, off-exchange solutions and third-party balance-mirror custody.”

Komainu, a joint venture of Nomura, CoinShares and Ledger, a digital asset security firm, was launched in the year 2020. It is regulated in Jersey, Dubai and London with offices in Dublin, Singapore and Dublin.

Parikshit Miishra is the editor.