Why cryptocurrency custody solutions are increasing?
The last six months have seen a significant growth in the number of companies and banks that launch cryptocurrency services. These solutions provide institutional investors with the peace of mind that their assets are safe, insured and under the care of a trusted third party, which frees them from the responsibility of safe guarding their cryptocurrency.
Recent releases of Crypto Custodianship
The number of cryptographic custody solutions that are released is growing rapidly. The seservices are aimed at institutional investors such as hedge funds, family offices and market intermediaries.
According to an investigation conducted by the Bank of New York Mellon, there is a growing demand in the market for a traditional custodian and established to providesecure storage of cryptocurrencies. For many, it is the bridge that will support the institutional capital that moves towards the market of the cryptocurrency. There have been reports that major banks are conducting tests and, in some cases, have implemented cryptographic custody solutions.
More recently, the Swiss investment bank Vontobel launched the ‘Digital Asset Vault’. The service allows Vontobel customers, which include more than 100 banks and wealth managers, to issue instructions for the purchase, custody and transfer ofintegrated digital assets within their family banking infrastructure and regulated environment. The German stock exchange Börse Stuttgart has launched adigital asset custody service. State Street, Fidelity and Coinbase also offer services.
Regulation in the USA EU It requires advisors to keep client funds with a qualified custodian. On the other side of the ocean, the European Securities and Markets Authority (ESMA) raised the issue that there is no harmonized definition of custody and registration of ownership of securities. This, in turn, makes it difficult to apply custody requirements to a new asset class, such as cryptocurrency. ESMA believes that greater clarity is needed around the types of services and activities that can qualify as custodians under the EU financial services rules, within a DLT framework.
Custody services are for traditional financial banks
Paul Puey, CEO of the Edge cryptocurrency portfolio, explained that while there has been a rapid increase in custody solutions, this trend has been limited to the traditional financial world of banks and funds that do not take advantage of the value andutility of crypto. .
The CEO said: “This would be similar to the 1990s when Internet companies requested telephone regulations to build VOIP solutions to replace the telephone companies, nothing more disturbing would come from that. Crypto is unique and powerful because the custodians they are not necessary to maintain digital value, we can replace institutional cryptographic investors with non-custodialapplications that hold money for users”.
It can be argued, however, that custody services are critical to the efficient functioning of financial markets. As previously noted by the SEC and ESMA, they often require regulation to protect investors from possible misappropriation of their assets.
Michael Ou, CEO of Coolbitx, explained that regulatory factors will play an important role in boosting efforts to comply with the exchanges of digital assets, particularly those found in the US. US, or that provide service to US customers. UU
He also reported the following:
“Custodialproviders face a simple fact: compliance with KYC / AML is a significant pressure of time and resources. In traditional finance, you will hardly see a single entity offering KYC / AML compliance, a large market of buyers and sellers, custody and all the other services that a single exchange offers now”.
He explained that as the market matures, so does the division of labor within the market. Therefore, it is much easier for exchanges to work with specialized entities in custody. According to Michael Ou, investors can expect custody solutions to become a major component of the cryptocurrency industry in the coming months and years.
Disclaimer: This press release is for informational purposes information does notconstitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin.