Bybit Embraces Custody-First Trading Model
Bybit has joined the Komainu Connect network, offering institutional traders a solution to a long-standing demand since the 2022 market downturn: the ability to trade around the clock without directly depositing assets onto an exchange. Komainu, already a regulated custodian supported by Laser Digital and Blockstream, has now directly linked its custody layer to Bybit’s order books. While conceptually straightforward, this integration has proven challenging for exchanges to implement.
Under this arrangement, assets are held in segregated, bankruptcy-remote wallets managed by Komainu. Mirrored balances enable trading on Bybit without the necessity of pre-funding accounts. The system automatically settles trades in the background, aiming to provide institutions with rapid execution while mitigating exposure to unnecessary exchange risks. "Institutions want to act quickly, but they aren’t willing to compromise on security anymore," stated Paul Frost Smith, Komainu’s Co-CEO. "Komainu Connect finally lets them do both."
Investor Takeaway: Custody-First Trading as the New Institutional Standard
The Importance of Trust in Institutional Crypto Behavior
Despite recovering crypto volumes, institutions remain cautious about asset storage. The events of recent years have led to revised internal policies, with most major trading desks now mandating third-party custody rather than allowing exchanges to hold balances directly. This is where Komainu plays a crucial role, acting as a neutral intermediary that handles custody, segregation, and legal protections between traders and trading venues.
Bybit's integration signifies that institutions no longer need to choose between liquidity and security; they can now achieve both, a balance that has historically been elusive in the crypto space. Komainu Connect already serves lenders, brokers, and other exchanges, and Bybit's inclusion further expands the network's reach. As more trading venues connect to the system, it simplifies the process for institutions to maintain a unified custody setup while accessing diverse markets.
Practical Benefits of the Bybit and Komainu Integration
The partnership introduces several practical features that are more significant than marketing claims:
- •Assets are kept off-exchange in individual segregated wallets.
- •Trading functions as if funds were on Bybit, facilitated by balance mirroring.
- •There is no requirement to pre-fund the exchange before initiating a trade.
- •Full transparency is ensured, with all activity on-chain and linked to a regulated custodian.
- •Support is available for multiple institutional-grade assets, with plans for further expansion.
For trading desks, this translates to reduced operational complexities and less manual intervention between custody and execution processes. It also minimizes settlement errors, a common challenge for large firms reconciling transactions across custodians, exchanges, and internal ledgers. "Our clients want security without losing the ability to move fast," commented Yoyee Wang, Head of Bybit’s B2B unit. "This partnership gives them that balance."
Investor Takeaway: Bybit Positions for Regulatory Shifts
The Future of Institutional Trading: Expansion and Workflow Improvements
Komainu has been actively expanding Connect to incorporate more trading venues and market counterparties. The objective is to provide institutions with a streamlined connection between custody and liquidity, moving away from fragmented independent systems. Bybit's entry into the network strengthens this ecosystem and brings a high-volume exchange with global reach.
For institutions, the immediate advantages include enhanced operational efficiency, quicker access to liquidity, simplified compliance procedures, and reduced exposure to exchange failures. For Bybit, this integration represents a significant step in its institutional strategy, making the exchange more appealing to regulated firms by combining a substantial liquidity pool with a fully segregated custody option. With further integrations anticipated, both companies are strategically positioning themselves at the forefront of a transition towards custody-centric trading workflows. This direction appears inevitable for the institutional market, and this partnership marks a considerable advancement toward that future.