Crypto Asset Collateral Mirror Plan: How to Reshape the Security and Diversified Scenarios of Institutional Digital Asset Trading?

Today, with the rapid development of the cryptocurrency market, I often hear a common problem in serving institutional clients: the high risk of counterparty and the high safety risks, which makes many institutions discouraged by digital assets. In 2022, the bankruptcy of crypto exchange FTX caused billions of dollars in losses, highlighting the severity of the trust crisis. In April 2025, Standard Chartered Bank and OKX launched the "Collective Mirror Plan" in Dubai, providing a pragmatic solution to this problem. The program utilizes custodial services from the Global Systematic Importance Bank (G-SIB), combining cryptocurrency and tokenized funds to create a safe and compliant trading environment for institutional clients. How does its operating mechanism be implemented? How to ensure supervision? What application scenarios can be supported? With these questions in mind, I will analyze this plan in depth and explore how it paves the way for the integration of traditional finance and digital assets.

1. Operation mechanism: "mirror" art of safety and efficiency

The core of the collateral mirroring plan lies in a clever mechanism: institutional clients deposit cryptocurrencies (such as Bitcoin, Ethereum) or tokenized money market funds into Standard Chartered Bank, which is kept by Standard Chartered as an independent trustee, and OKX records these assets through "mirror" technology to facilitate over-the-counter trading (OTC). This is a bit similar to the function of "Alipay" or "law firm witness".

In specific operations, each participant performs his/her duties:

• Standard Chartered Bank: As a global systemically important bank, it is responsible for custodying collateral and ensuring the security of assets. It is strictly regulated by the Dubai Financial Services Authority (DFSA).
• OKX: The world's leading crypto exchange manages transaction processes, records "mirror" assets, and runs under the framework of Dubai Virtual Assets Regulatory Authority (VARA).
• Franklin Templeton: Provides tokenized money market funds, a digital low-risk investment product similar to "stable financial management", adding stable options to the plan.
• Early clients: such as Brevan Howard Digital, an investment company focused on digital assets, has pioneered the program.

For example: an institution wants to trade $50 million worth of Bitcoin for Ethereum. They deposited Bitcoin to Standard Chartered Bank, OKX facilitated the transaction, and after completion, Bitcoin was returned safely. The whole process is both efficient and safe, and there is no problem of the high risk of who will make the payment first.

2. Regulatory Framework: Dubai VARA and DFSA

Previously, Aiying mentioned the "[Long Article] Detailed explanation of the application process for the Dubai Virtual Assets Regulatory Authority (VARA) license: A comprehensive interpretation of the list of 21 licensed companies, regulatory frameworks and fee structures", and thanks to the dual regulatory frameworks of VARA and DFSA, it targets virtual assets and traditional financial services respectively, and compared with the Hong Kong "TUSD-FDT on Reserve Misappropriation Incident: The "Loopholes" and Implications of Hong Kong's Crypto Trust Supervision" to form a relatively complete regulatory system.

1. VARA is a regulatory agency specially established in Dubai for virtual assets. It was established in 2022 to make Dubai a global blockchain financial center. Its supervision is based on the following core regulations:

"Virtual Asset Supervision Act No. 4 of 2022": Define virtual assets as assets that can be digitally traded or invested, and authorize VARA to regulate virtual asset service providers (VASPs), such as OKX. The regulations require OKX to obtain a license, comply with anti-money laundering (AML) and anti-terrorism financing (CFT) regulations, and ensure technology security.

"Virtual Assets and Related Activities Regulations 2023": Detailed regulation of transactions, brokerage, custody and other activities. OKX's "mirror" technology must comply with technical security and data protection requirements, and transactions require disclosure of fees and risks.

Cabinet Resolution No. 111/2022: Prohibit unauthorized virtual asset activities and strengthen compliance thresholds.

In the plan, OKX, as a VASP, must hold a VARA license (obtained in October 2024), implement customer due diligence and submit compliance reports.

2. DFSA: "Security Lock" of Hosting Services

DFSA is the regulator of the Dubai International Financial Centre (DIFC) that oversees Standard Chartered Bank's custody activities. Its supervision is based on:

• Regulatory Law No. 1 of 2004: Regulate financial services within DIFC, including custody, banking, securities, etc., and requires Standard Chartered to ensure the safety of assets and implement internal controls.
• "Crypto Token System" (2022): Regulations on the custody and transaction of crypto tokens, and stipulate customer fund isolation, data protection, etc. Franklin Templeton's tokenized funds are also considered "investment tokens" and are regulated by this.
• Data Protection Law No. 9 of 2004: Standard Chartered requires that customers protect their data and prevent leakage.

Standard Chartered Bank's DIFC hosting service is like a "super safe", which is not only physically and technically secure, but also has to undergo regular inspections from DFSA.

The synergy of dual supervision

VARA manages OKX transactions and DFSA manages Standard Chartered custody. The two form "double insurance" through the common goal of anti-money laundering and investor protection. For example, DFSA has an information sharing mechanism with UAE financial intelligence units to ensure AML/CFT compliance. This regulatory synergy allows the plan to be innovative while maintaining high credibility.

However, security and compliance are just the foundation, and the real appeal of the plan is its ability to "unlock" the multiple uses of digital assets.

3. Application scenario: The "master key" of digital assets

I personally think that this product innovation has indeed solved some obstacles in many business scenarios, in the past experience of serving customers. I think the following are some typical scenarios:

• Large OTC: Institutions often need to conduct private transactions of cryptocurrencies, such as exchanging Bitcoin for Ethereum. In the past, it was very risky to hand it over to the counterparty directly. Nowadays, customers deposit Bitcoin to Standard Chartered Bank, and the exchange facilitates transactions, and the assets are safe throughout the process.
• Digital asset lending: Institutions can borrow USD or other assets with cryptocurrency mortgage. Standard Chartered custody collateral, exchanges connect to lending platforms to reduce the risk of platform running away. Imagine a company borrowing $10 million with a tokenized fund, and the assets will be safely returned after completion, which will save worry and effort.
• Derivative Trading: Cryptocurrencies can be used as margin for futures or options. Customers deposit assets into Standard Chartered and the exchange confirms "mirror" assets, and institutions can participate in high-yield transactions, taking into account security and flexibility.
• Cross-chain transactions: Asset swaps on different blockchains (such as Ethereum and Solana) are complex and risky. It is planned to simplify the process through Standard Chartered Custody and Exchange's "mirror" technology, allowing customers to easily complete cross-chain transactions.
• Real-world Assets (RWA) Transactions: Tokenized real estate or bonds can be used as collateral. For example, a company trades tokenized real estate for Bitcoin, and Standard Chartered's custody makes the transaction more credible.
• DeFi access: Institutions want to participate in the high returns of DeFi, but are worried about smart contract vulnerabilities. It plans to allow customers to safely enter DeFi lending or liquidity mining through Standard Chartered assets.

Franklin Templeton’s tokenized money market funds are particularly eye-catching in these scenarios. Its stability makes institutions more willing to use it as collateral, similar to the "digital version of stable financial management".

4. Future potential: The bridge between traditional finance and digital

assets

The collateral mirroring program is not only an innovative service, but also a practical tool that connects traditional finance and digital assets. I think its potential lies in providing institutions with a safe and compliant digital asset participation path. Although it is currently limited to the Dubai pilot, it is expected to gradually expand in specific areas and markets in the future.

First, plans may attract more institutions to the digital asset market. Many banks and asset management companies are cautious about cryptocurrencies, mainly because of security and compliance risks. Standard Chartered Bank’s custody services (regulated by DFSA) and VARA’s strict regulation provide institutions with a credible environment, while Franklin Templeton’s tokenized money market funds adds stable options. For example, institutions like Brevan Howard Digital have participated in the pilot, and more companies may try to tokenized funds or cryptocurrency trading in the future to gradually expand market participation.

Secondly, the experience of the Dubai pilot may provide reference for other regions. Dubai’s regulatory sandbox creates a testing environment for the program. If pilot data indicates improved transaction efficiency and security, digital asset-friendly markets such as Hong Kong and Singapore may learn from their models. For example, the Sandbox of the Monetary Authority of Singapore (MAS) has supported blockchain-like financial projects, with the planned technical and regulatory frameworks potentially replicating. Optimization of blockchain technology (such as reducing Gas fees) will also reduce transaction costs and improve competitiveness.