Bybit’s integration with Cactus Custody introduces an off-exchange settlement system that keeps assets locked down until trades clear, drastically reducing counterparty exposure and potentially neutralizing one of crypto’s oldest threats.
Summary
- Bybit partners with Cactus Custody to launch off-exchange settlement, eliminating pre-funded accounts and reducing counterparty risk for institutional traders.
- New system keeps assets in custody until trade execution, combining SOC 2-audited cold storage with real-time compliance checks.
- The integration comes months after a $1.5 billion hack, positioning the partnership as both a structural safeguard and reputational rebuild.
According to a press release dated July 23, cryptocurrency exchange Bybit has partnered with Cactus Custody, a licensed digital asset custodian under Matrixport Group, to integrate Cactus Oasis. This institutional-grade settlement layer removes the need for pre-funded exchange accounts.
Under the new system, assets remain under Cactus Custody’s control until the moment of trade execution, only moving to Bybit for final settlement. The integration, set to go live on July 28, targets hedge funds, proprietary trading firms, and other institutions that have been hesitant to engage in crypto markets due to counterparty risks and capital inefficiencies.
A structural rethink for crypto’s riskiest chokepoint
Cactus Oasis functions as a custody-backed airlock between institutions and exchanges. Rather than depositing funds directly onto Bybit, traders allocate collateral to Cactus Custody’s segregated accounts, which are regulated and SOC 2-audited vaults that only release assets when trades are executed.
Cactus Custody stated that the system utilizes buffer accounts to consolidate liquidity across multiple exchanges, allowing institutions on Bybit’s platform to trade without scattering capital across pre-funded balances.
Key mechanics from the press release:
- Dual-authorization workflows ensure that there is no single point of failure, requiring pre-approved internal sign-offs before any settlement.
- Real-time Know Your Transaction monitoring screens for suspicious activity mid-trade, adding a layer of compliance.
- Bank-grade cold storage holds 95% of assets offline, with HSMs (hardware security modules) encrypting the remaining hot wallet sliver. Cactus claimed this setup thwarted a 2023 attempt to breach its systems.
For institutional traders, this means capital no longer sits idle or exposed on exchanges. A hedge fund can now deploy $100 million across Bybit and rival platforms while keeping the bulk secured under Cactus’ custody, freeing up liquidity that would otherwise be trapped.
“We are committed to providing our institutional clients with secure, efficient, and flexible trading solutions. Integrating Cactus Oasis enhances our offering, enabling institutions to manage liquidity more effectively without sacrificing asset security, ” Shunyet Jan, Head of Institutional and Derivatives at Bybit, said.
A critical rebuild of trust
The timing of this partnership isn’t incidental. Five months after Lazarus Group’s $1.5 billion heist nearly toppled Bybit, the exchange is methodically reassembling its institutional appeal.
Emergency loans from industry peers kept it afloat, but the hack exposed a fatal flaw in crypto’s status quo: exchanges as de facto banks, holding assets hostage to their solvency.
Cactus Custody’s solution offers Bybit more than risk mitigation; it’s a reputational reset. By ensuring client funds never reside on its books before trade, Bybit effectively insulates itself (and its users) from the next potential breach. It’s a structural fix that even regulators might applaud; Hong Kong’s SFC has quietly encouraged such custody‑execution splits since 2024’s custody rule updates under its Safeguards roadmap.
