Institutions Shift Crypto Custody Off Exchanges After FTX

Institutional investors moved crypto custody off trading venues after the 2022 collapse of FTX and the Celsius bankruptcy. Many adopted off‑exchange settlement systems from providers such as Fireblocks and Copper to limit counterparty exposure. Coinbase Custody Trust Company continues to hold custody for more than 80% of global crypto ETF assets.

Under off‑exchange settlement, institutions keep assets with a third‑party custodian or in self‑custodied wallets while exchanges receive a trading balance or credit line backed by those assets. Trades execute on exchanges but the underlying assets remain in segregated custody. Settlement often occurs on a net basis after trades clear.

Fireblocks launched its Off‑Exchange product in November 2023, offering Collateral Vault Accounts secured by multi‑party computation cryptography that generate trading credit for connected exchanges. Copper’s ClearLoop keeps assets in Copper’s MPC custody and settles trades on Copper’s infrastructure. Deribit integrated Fireblocks OES in February 2024 and HTX in April 2025. ClearLoop connects multiple exchanges, including Coinbase, OKX, Bybit, Deribit and Bitget, and industry figures cite more than $50 billion in monthly notional volume.

Market participants pointed to a 2025 hack of Bybit as an example where off‑exchange arrangements limited losses for custodial clients.

Approval of spot Bitcoin ETFs in January 2024 established a required separation between custodians and trading venues for major institutional products. ETF operations require a custodian, authorized participants for creation and redemption, and exchanges for secondary‑market trading. Coinbase Custody serves as custodian for a majority of those ETFs. In April 2026 the Office of the Comptroller of the Currency granted Coinbase conditional approval to charter a national trust.

Legal and operational protections are built into OES products. Fireblocks’ Collateral Vault Accounts keep an institution’s principal off an exchange balance sheet and include disaster recovery services via Coincover. Copper structures client assets under English‑law trusts that are intended to protect holdings from exchange insolvency and, in some cases, custodian insolvency. Industry analysts say an exchange failure under OES would most likely expose unsettled profit‑and‑loss positions rather than full deposited balances.

The institutional custody market was estimated at about $3.2 billion in 2024 and projected to reach $27.8 billion by 2033 at an annualized rate of roughly 26.7%. Institutions are testing tokenized collateral and regulated on‑chain cash equivalents to improve capital efficiency while keeping custody separate from trading. Traditional finance firms have entered the market: in 2025 BBVA partnered with Binance to offer regulated custody to institutional clients, and Nomura’s Laser Digital applied for an OCC license to operate a national trust focused on crypto custody and related services.

Dominic Lohberger, chief product officer at Sygnum, called the recent wave of exchange derisking one of the largest since FTX and linked it to a recent major cyberattack. Wing Cheah, product manager at Interchange, described institutions as prioritizing capital efficiency and noted that off‑exchange settlement returns custody and control to asset owners.