Institutional crypto has come a long way. But managing capital and risk across digital assets still looks nothing like traditional markets. STS Digital has just rolled out a way to pool collateral across different asset classes, taking a tool that has long been a staple of traditional futures trading and prime brokerage and bringing it into crypto for the first time. Joining me to discuss this is Gideon Hyams, Co-Founder and Chairman of STS Digital. Gideon, welcome to the show.
Thanks a lot. Nice to meet you.
Where do you see the biggest inefficiencies in how institutions deploy and manage capital across digital assets?
The biggest inefficiency and pain point for institutions right now is fragmentation. An institution that wants to trade digital assets today typically holds collateral in five or six different places. Margin at one venue for perpetuals, collateral at another for options, spot balances across several others. None of these talk to each other. So a firm that is well-hedged in aggregate ends up posting margin as if every position stood alone.
STS Digital just launched cross-asset portfolio margin. What does that actually change for an institutional trading desk?
In practical terms it means one portfolio and one margin number. A desk facing us can trade spot, vanilla options, exotic options, structured products across hundreds of tokens, with tokenised equities and commodities coming soon, all posted against a single pool of collateral. Our risk model looks at the whole book rather than each position in isolation. A very popular strategy is clients selling covered calls for yield enhancement across different tokens. If a client holds spot and has sold a call against it, those positions offset each other. Under the old approach they would be margined separately — that makes no economic sense. Under portfolio margin, the model recognises the hedge and the margin requirement reflects the net of the two positions. For an institution, that means posting less capital. Less trapped margin.
How does portfolio margin allow firms to use their balance sheets more efficiently without introducing additional risk?
Firstly, it is much simpler operationally. You see one number instead of six. You can trade every asset class 24/7 with on-chain settlement to external custody. And importantly, portfolio margin is not a leverage product. The risk in the portfolio does not change. What changes is how we measure it accurately. If two exposures generally offset each other, netting them is not adding risk — it is removing a measurement error. The hedge book was always lower risk. The margin just never reflected that properly before. Equally important is what we do not net together. Where positions do not offset each other or where the relationship between them is not stable, they stay margined separately. We are deliberately conservative there. The outcome is the same risk but with less trapped capital, and that freed capital can go back to work in the business.
How important will more sophisticated collateral and risk management infrastructure be to MENA's next phase of institutional adoption?
Critically important — it is actually the deciding factor. Globally, institutional adoption follows infrastructure, not the other way around. Institutions do not enter a market hoping it matures. They wait until the counterparties, the custody, the documentation, and the risk frameworks meet their standards — and then they move in with size. MENA has strong momentum right now. Regulatory ambition, sovereign interest, real institutional appetite. The next phase depends on whether the infrastructure keeps pace. Institutions in MENA will ask the same three questions as institutions anywhere: who is my counterparty, how is my collateral protected, and how efficiently does my capital work? The firms that can answer those three questions are the ones that will carry the region into the next phase.
Thank you so much, Gideon.
Pleasure. Thanks a lot.
