Another major crypto exchange has fallen victim to a hack—this time, Bybit. While the full impact is still unfolding, one thing remains undeniable: storing assets in exchange wallets exposes traders to unnecessary risks. In today’s market, this risk is increasingly unnecessary and manageable, particularly with solutions like off exchange settlement.

This incident, like others before it, highlights the Achilles’ heel of centralized platforms. Institutions, especially those trading at scale, require a more secure and reliable way to participate in the market without the worry of exchange hacks, insolvencies, or —as we’ve seen infamously in the past—mismanagement. Fireblocks Off Exchange Settlement offers precisely that solution. In Bybit’s case, who have Off Exchange enabled by Fireblocks, funds were safe from the hack and settlements with the exchange were made uninterrupted as intended.

Why Off-Exchange Settlement is Essential for Exchanges

Fireblocks Off Exchange Settlement revolutionizes how traders interact with exchanges. It eliminates the need to pre-fund exchange accounts or store assets in exchange-controlled wallets. Instead, funds are securely held in a segregated collateral account, mirrored 1:1 on the exchange. This can be managed directly by clients through their own Fireblocks account or via a Fireblocks-enabled regulated custodian ensuring:

• Mitigated Counterparty Risk: Assets remain in the client’s custody (either directly or with a regulated custodian), effectively shielding them from exchange-related risks like hacks, fraud, and business failures.
• On-Chain Transparency: By avoiding pooled funds, off exchange settlement significantly reduces exposure to mismanagement, commingling, or insolvency.
• Increased Trading Volumes: Instant trading credit and reduced risk translate to higher trading volumes and more revenue opportunities for both clients and exchanges.
• Institutional-Grade Security: Built on proven Fireblocks technology and security standards, trusted by leading exchanges and market makers.

The Future of Exchange Trading is Off-Exchange

The question is no longer if exchanges should adopt off exchange settlement, but when. Incidents like the recent Bybit event underscore the urgency of this transition. Exchanges that delay embracing this crucial security and operational enhancement risk losing market confidence and falling behind their more forward-thinking competitors.