All exchange and custody services in connection with trading and holding cryptocurrency tokens and other digital asset tokens (collectively, "cryptocurrency") through the Interactive Brokers LLC ("IBKR") platform are provided by external cryptocurrency service providers. Depending on your location and account type, either Paxos Trust Company, LLC (a New York Limited Trust Company licensed by the New York Department of Financial Services) or Zero Hash LLC (a FinCEN-registered Money Services Business licensed as a money-transmitter in various states, and holder of a BitLicense by the NY Department of Financial Services) is your “Cryptocurrency Service Provider.”
This means to trade cryptocurrency, you must become a client of a Cryptocurrency Service Provider. When you request the cryptocurrency trading permission in IBKR Client Portal, you agree to permit IBKR to provide your information to your Cryptocurrency Service Provider in order to apply for an account in your name at that provider, and you are required to sign your Cryptocurrency Service Provider’s Terms & Conditions. You must also sign a Supplement to your Interactive Brokers Client Agreement which authorizes and instructs Interactive Brokers LLC to engage in certain cashiering activities in your IBKR securities brokerage account to (i) withdraw US dollars from your securities brokerage account and transfer them to your account at your Cryptocurrency Service Provider to pay for cryptocurrency purchased and (ii) to sweep proceeds of sales of cryptocurrency at your Cryptocurrency Service Provider out of your account at the Cryptocurrency Service Provider and into your securities brokerage account at IBKR. Cryptocurrency trading permissions are enabled once the required agreements have been signed and you have been approved as a client by your Cryptocurrency Service Provider.
Once enabled, you can trade cryptocurrency in your Cryptocurrency Service Provider account using the IBKR trading platforms. When you trade cryptocurrency through the IBKR platform, although Interactive Brokers LLC acts as your cashiering agent, neither Interactive Brokers LLC (“IBLLC”) has custody or control over the cryptocurrency assets you hold in your account at your Cryptocurrency Service Provider. All cryptocurrency transactions occur on the Cryptocurrency Service Provider’s exchange. The Cryptocurrency Service Provider is your custodian for all cryptocurrency assets, and none of the legal protections associated with your securities account at IBKR (such as insurance under the Securities Investor Protection Act or Financial Services Compensation Scheme (FSCS)) apply to those cryptocurrency assets.
By supporting cryptocurrency trading through IBKR’s platform in conjunction with the Cryptocurrency Service Providers, IBKR provides its clients the convenience of centralized cash management and a single user interface that shows both their IBLLC-carried securities & commodities positions and their Cryptocurrency Service Provider-carried cryptocurrency positions.
To comply with all relevant regulatory requirements and to avoid any client confusion, IBKR keeps the distinction between activities and positions at IBKR and activities and positions with Cryptocurrency Service Providers very clear throughout all of the trading platforms. This may include the presentation of symbols indicating an asset is held at your Cryptocurrency Service Provider, headers, footers, pop-ups, and other such notices.