GMEX Adds Digital Custody and Vault Capabilities

GMEX Technologies has added digital custody and vault capabilities to GMEX Fusion, its hybrid centralized and distributed ledger technology (DLT) product suite for trading and post-trade. GMEX Fusion caters to institutional investors that require exchange custody, self-custody or third-party management of their digital asset accounts. Similarly, cryptocurrency and digital asset exchanges seeking to expand liquidity and attract new participants require custodian partners that are able to scale technology to cater to the needs of institutional participants. 

Hirander Misra, chairman and CEO of GMEX, says that while traditional custodians and central security depositories (CSDs) are well-placed to offer new digital services in tandem with current traditional services, they need to extend their capabilities to interface with the crypto markets in order to, for example, introduce distributed-ledger functionality integrated with existing technology and workflows.

“This includes custody of crypto assets and digital assets that can be validated but are not issued with an ISIN, such as private securities, as well as tokenization and handling of fiat national currencies and existing securities. [This is] so that they can be traded, cleared and settled, as well as financed in the context of a digital environment,” he says. “The latter is really an extension of current business [practices] and can be done even if there is some reluctance at the outset to handle cryptocurrencies until they are more comfortable.”

Integrating DLT functionality with existing technology is a challenging process. The existing world has to coexist with the new world because people are less comfortable with the old rip-and-replace model when it comes to new technologies. “DLT should be value added as opposed to do less or the same as existing technology and processes,” Misra says. “It is a challenge we are embracing as trading and post-trade activities are now being facilitated by us on multiple private and public blockchains with integration into existing infrastructures using the likes of FIX and Swift, leading to interoperability.”

The additions to GMEX Fusion—ForumCustody and ForumWallet—aims to address the increasing need for centralized and distributed technology to be implemented together. 

ForumCustody, the digital custody piece, is being targeted at exchanges and custodians. It can be hosted and run independently from the company’s existing trading system, with a direct blockchain adaptor interface to the ledger that enables connectivity between different nodes. It uses standard cryptocurrency wallet protocols, and can interface with third-party systems, for the physical transfer of coins. ForumCustody manages internal balances and locks withdrawal requests until they are confirmed. It also handles multiple types of digital assets, including security tokens. 

ForumWallet, GMEX’s digital vault offering for secure wallet management, is integrated with ForumCustody. It can be deployed by an exchange or third-party custodian linking to their internal cryptocurrency and digital asset storage, or by third-party providers looking to provide wallet subsystems. The ForumWallet subsystem automatically creates and manages wallets, which are never deleted. Wallet keys and key backups are encrypted—including with configurable periodic key rotation—and stored.

Hirander says the rotation timetables can be configurable as the operator sees fit, be it daily, weekly, or monthly. This provides the operator with control and flexibility in that they conform to existing governance practices. 

“When we designed the product suite we spent a long time investigating and assessing why some of the crypto exchanges were hacked and what could be done to progress it. In many cases, their failure was not only down to poor technology and lack of network security, but also down to poor operational processes and procedures. We are confident we have addressed all these aspects,” he adds. 

The ForumCustody and ForumWallet framework can also be used to tokenize existing securities and assets, an area where institutional demand is increasing, Hirander says. Examples of this include SIX launching Swiss Digital Exchange with the ability to tokenize existing securities and non-bankable assets, as well as the Singapore Exchange’s recent investment into iSTOX, a capital markets platform that allows issuers to raise capital via security token offerings.