April 15, 2024

Since 3AC, FTX and other organisations were blown up in a series of landmines, the phenomenal growth rate of the digital asset market has been shattered and increasingly stringent regulatory measures. At a time when the crypto community is still facing the double pressure of a declining market and a set of strict SEC regulations, EDX Markets (EDXM) compliance framework has injected fresh confidence and hope into the institutional crypto trading world, proving to the many financial industry players who remain crypto-curious but unconvinced that exchanges can indeed comply with regulatory requirements. 

Wall Street-backed EDXM has come along at just the right time to provide a viable route to a compliance strategy that is more ready to tackle evolving regulations through two important points. First, it does not deal with retail investors but only serves institutional clients. Second, it divests itself of providing digital asset custody services by not safekeeping or handling any financial assets. EDXM gave a preview of what to expect, showing an exchange structure that meets the regulator's requirements through focusing on digital asset trading, leaving custody of assets with a third party, thus minimising risk to users' assets and completely eliminating asset misappropriation, as was the case with the previous FTX. 

The Chairman of the SEC has raised concerns that exchanges are not creating the proper "firewalls" between the different businesses, including trading, market making, and asset custody, indicating a shift in regulatory direction and the EDXM stepped into a perfect opportunity to set a new industry standard. While we celebrate an industry breakthrough, one would start to think if the "non-custodial model" is the only route to success in crypto compliance? Are providing digital asset custody services and being compliant mutually exclusive? Do crypto exchanges need to start divesting their asset custody businesses? The good news is that digital asset trading institutions can have it all – keeping their asset custody business and still be effectively compliant through a powerful suite of solutions from ChainUp Group. 

ChainUp's answer to coexist asset custody services and compliance

As a leading blockchain solution provider, ChainUp has consistently led the way in  global compliance trends. ChainUp’s comprehensive suite of blockchain technology solutions, trusted by over 300 crypto organisations worldwide, is readily available to address the evolving regulatory requirements of institutional investors, to meet their needs for secure, efficient, and diversified custody. ChainUp introduces a  multi-party computation (MPC) wallet and a decentralised exchange (DEX) system. These offerings seamlessly cater to users' demands for both compliant and secure hosting.

1. MPC Wallet

ChainUp‘s cutting-edge MPC Wallet solution revolutionises asset custody by placing control directly in the hands of users, ensuring the utmost security and compliance for exchanges, enterprises, and organisations. 

MPC wallet also solves the dilemma of many traditional digital asset wallets (e.g. MetaMask), where users face the risk of permanent loss of assets due to leaked or stolen private keys.

Multi-party Computing (MPC) works by splitting the traditional private keys into multiple pieces and distributing them in multiple locations to ensure that no one has full access to the traditional private key. To authorise transactions, multiple holders of private key fragments must authorise it together to complete the action. The MPC algorithm mechanism allows the user to refresh the private key information at any time, so that the leaked information is invalidated and a new private key is generated.

Combining MPC technology with hardware isolation, distributed storage of encrypted information and the introduction of security measures such as AML/compliance and policy engines, multi-signature mechanisms, threshold signatures, whitelisting capabilities and SOC2 auditing, ChainUp allows users to have complete control of their assets while reaping the benefits of a secure, efficient, flexible and compliant hosting solution.

2. DEX system that connects seamlessly with CEX

In the era of Web3.0, an increasing number of projects and exchanges are dedicated to restoring the control of users' information and assets back to the users, in a feat to achieve sustainable development. As such, decentralised exchanges (DEXs) have also become increasingly popular. With that, ChainUp has developed a DEX system that places control directly in the hands of users to avoid market manipulation, insider trading and other operations and at the same time seamlessly connects to the centralised exchange (CEX) user experience allowing users to adapt easily.

This system fully satisfies the users' quest for control over their assets, rather than storing them in third-party organisations (e.g., in wallets managed by CEXs). This DEX system enables users to access third-party wallets on their own and users can have maximum control of their assets  reducing the risk of being stolen, frozen or manipulated. In addition, the system uses technical means such as multiple signature mechanism and smart contract to ensure the legitimacy and security of all transactions. Most importantly, it would not sacrifice the trading experience and provides core trading modules similar to CEXs such as spot trading, futures trading, etc.,

About ChainUp Group

ChainUp is a global leading end-to-end blockchain technology solutions provider covering infrastructure development and ecosystem support. We provide a complete suite of secure and compliant blockchain solutions including digital asset exchange, NFT trading, wallet, liquidity, Web3 infrastructure, merkle tree proof-of-reserves, digital asset custody, and more. Explore more blockchain solutions here: https://chainup.com/ 

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