Ethereum

Crypto Custody Market Overview — Who Are the Biggest Players?

single-image

bitbond bitcoin lending

Cryptocurrency custody providers seem to be springing up all over the global digital landscape in 2019, and the crypto platform Coinbase emerging as the leader in the sector. At their very core, custody platforms are designed to serve as independent storage/security units that are aimed primarily at institutional investors. These solutions, more often than not, tend to make use of a combination of various hot and cold storage technologies.

Also, while cryptocurrency exchanges and regular wallet systems conventionally utilize private keys (and other such security protocols) to protect an individual’s holdings, these alphanumeric phrases can be quite difficult to remember and have the potential to be stolen (or hacked) by individuals with sufficient knowledge of such things. In this regard, custody platforms help in eliminating any fears that investors may have because they are designed specifically to prevent the loss of one’s savings due to wallet thefts, misplaced private keys, etc.

Another reason why crypto custodians are gaining widespread traction is because of their regulatory-compliant design. In this regard, per the United States Securities and Exchange Commission (SEC), institutional investors that possess customer assets worth $150,000 or more are required by law (Dodd-Frank Act) to place their holdings under the control of a “qualified custodian.” To be more specific, the entities that the SEC lists under the aforementioned umbrella include:

  • Banks. 
  • Savings associations. 
  • Registered broker-dealers.
  • Futures commission merchants.
  • Foreign financial institutions are also included in this definition.

There currently exist a very small number of traditional financial entities that are offering their customers custodianship-related offerings. 

On the issue, Gongpil Choi, director of the Korea Institute of Finance — an agency that works hand-in-hand with the local government to research and evaluate financial policies that are designed to strengthen the country’s financial sector — was quoted as saying: “Even the traditional financial sector has seen the establishment of the custody market. Cryptocurrencies are more risky than traditional assets and the custody market in crypto will become a rapidly growing market.”

Coinbase is dominating the custody market

Coinbase’s recent foray into the institutional-grade custody solutions market indicates the firm’s resolve to dominate this rapidly growing domain. Additionally, the premier crypto exchange recently announced several acquisitions related to areas such as investment management and financial licences — thereby showcasing its serious shift to and focus on the institutional market. On the matter, Kenneth Yeo, CEO of Singapore-based crypto options trading platform Sparrow, pointed out in an email to Cointelegraph:

“Global market uncertainties (the trade war and political turmoil) have resulted in crypto increasingly becoming a safe haven. More and more crypto firms are gaining awareness of the huge potential and the current market gap for onboarding institutions to the crypto world. This marks an important shift among crypto giants to win over Wall Street.”

Yeo also believes that as the digital asset industry continues to mature, an influx of more sophisticated products that can rival traditional market offerings, such as derivatives, will be observed. Also, owing to the fact that Bitcoin’s appeal seems to be growing rapidly across the globe, mainstream entities are no longer ignorant of this asset class and are looking to expand their reach into this relatively untapped space. 

Lastly, the recent increase in demand for crypto custody solutions (over the past 12 months or so) is quite natural, especially considering that institutional folks are buying over $200 million to $400 million worth of crypto per week these days. Similarly, in the crypto Wild West — where security breaches and hacks are quite common — Yeo pointed out that over the first half of 2018 alone, over $1.1 billion in crypto was lost due to theft and fraud. In this regard, custodians are able to provide traditional finance institutions with a sense of monetary security and long-term stability. Yeo added:

“We’ve experienced significant demand and interest from institutional investors for regulated custody solutions, it is no wonder that services such as custody solutions have been gaining traction. On top of custody, yield and risk management products have been highly sought after in the space.”

Coinbase takes over Xapo’s custody business 

Around two weeks back, Coinbase CEO Brian Armstrong confirmed that his company had entered into an official agreement with storage giant Xapo in order to take over the firm’s custody business. If that wasn’t enough, the move reportedly put Coinbase at the helm of institutional management (for crypto), with the premier trading platform currently holding over $7 billion worth of digital assets in its coffers. 

And while the financial specifics of the deal have not yet been made public, a source linked closely with media giant Fortune claimed that Coinbase paid around $55 million (a sum that was higher than what Fidelity had allegedly offered) to finalize the agreement.

Coinbase Custody’s Assets Under Custody (AUC) comprises funds that are owned by more than 120 clients (across 14 different nations). Additionally, in May of this year, the exchange’s AUC crossed the $1 billion mark. As a result of this latest deal, Xapo’s institutional custody business will be able to complement Coinbase’s associated infrastructure (related to this domain). 

Coinbase’s cryptocurrency custody service was launched in July last year for institutional clients based across Europe and the U.S. Some of the currencies that are supported by the platform include Bitcoin (BTC), Bitcoin Cash (BCH), Ether (ETH), Ethereum Classic (ETC), XRP and Litecoin (LTC).

Xapo is licensed and regulated by the Gibraltar Financial Services Commission and has been classified by the regulator as being an electronic money institution. Not only that, the platform was also awarded a BitLicense by the New York State Department of Financial Services last year, thereby making it the sixth digital entity (at the time) to have gained the license.

Related: Crypto Custody: Adoption Shortcut or Blockchain Purists’ Nightmare?

Since its market inception, Xapo has been able to raise a little over $40 million from a number of established financial institutions such as Benchmark, Greylock Partners, Fortress Investment Group and Emergence Capital Partners.

Last but not least, over the past year or so, the crypto market has grown to encompass a number of new offerings (primarily related to Bitcoin futures) that have been released by various big-name players such as Bakkt and Binance. On the issue of expanding its product profile range, Coinbase released a post on its website stating that in the future, the company is looking to explore new ways to monetize and leverage crypto assets — primarily by means of staking, borrowing against crypto portfolios, and lending digital currencies to trusted counterparties.

Custody solutions are on the rise

According to a research piece released by the Bank of New York Mellon, the demand for crypto-centric custody solutions is currently at an all-time high. This is because many analysts believe that such offerings will help bridge the gap that currently exists between the institutional investment market and the digital industry. 

In this regard, a fair few banks have reportedly been testing and rolling out their very own custody platforms. For example, Swiss bank Vontobel recently launched its Digital Asset Vault, which provides its clients with access to more than 100 banks and wealth managers — primarily as a means of giving instructions regarding the purchase, custody and transfer of digital assets using the institution’s existing infrastructure and regulated environment. Similarly, German stock exchange Börse Stuttgart, State Street, Fidelity as well as Coinbase are offering their customers similar services. 

Current regulations in the U.S. require advisers to keep their client’s crypto assets with an authorized custodian. And since there exists no singular definition as to what the term “crypto safekeeping” means across Europe, the European Securities and Markets Authority has requested a number of countries located within the region to create a framework that establishes more clarity regarding the matter.

It is just the start

The wait for Bakkt’s much-hyped futures and custody platform will finally end later next month — on Sept. 23. According to a blog post released by the Intercontinental Exchange, or ICE — the governing body behind the New York Stock Exchange — Bakkt has been cleared by the NYDFS to serve as a qualified custodian. 

Similarly, the Commodities Futures Trading Commission, or CFTC, has also given Bakkt permission to trade Bitcoin futures. Lastly, company officials have confirmed that the platform will be developed to a point (in the near future) so that customers will be able to physically settle contracts in BTC. Bakkt was supposed to go live late last year. However, due to certain regulatory issues, the platform was unable to obtain the necessary clearance to start selling its BTC futures contracts until mid-September.





Source

Leave a Reply

avatar
  Subscribe  
Notify of

You may also like

Bitcoin

Bitcoin Price Drop Mirrors Last Golden Cross Which Led to 170% Gains

single-image

bitbond bitcoin lending

Bitcoin (BTC) may not see a 170% increase after its fifth “golden cross” price event, historical data suggests as markets stay down 8%.

Analysis of price movements since 2009 shows Bitcoin has had a total of ten “golden cross” and “death cross” moments in its lifespan. 

BTC price dip challenges December 2017

A “golden cross” is when BTC/USD sees its 50-day moving average rise to cross over its 200-day moving average. A “death cross” is the opposite. 

As Cointelegraph reported, hopes are currently high that the most recent golden cross will spark an identical reaction to the previous one — a 170% price surge in just two months. 

Overall, however, two out of four golden crosses have resulted in gains, while the other two in fact saw price losses. Similarly, some death crosses were followed by price gains.

Bitcoin traders continue to dig for answers after BTC/USD abruptly dropped $1,000 in…

View More Article
Blockchain

Aussie Blockchain Startup Tells Gov’t Its Tax Laws Are Stifling ICOs

single-image

bitbond bitcoin lending

You need nothing short of “a miracle” to succeed with an initial coin offering (ICO) in Australia, a local industry leader told the government this week.

At a Select Committee on Financial Technology and Regulatory Technology hearing on Feb. 20, Dr. Jemma Green said her blockchain firm had succeeded despite, not thanks to, government policy. 

Dr. Green is the executive chairman and co-founder of Australian blockchain energy firm Power Ledger, which develops blockchain-based software for decentralized energy trading. ZDnet reported her remarks on the day of the hearing.

Tax system not “fit for purpose”

Dr. Green appeared before the committee in her capacity as a fellow of domestic blockchain industry body Blockchain Australia. Earlier this year, Blockchain Australia published a report, together with the RMIT Blockchain Innovation Hub at RMIT University,…


View More Article
Blockchain

Juventus Soccer Club Offers Digital Trading Cards through Sorare

single-image

bitbond bitcoin lending

The Italian soccer team Juventus has a number of traditional collectibles available for purchase by its fans, but this week it’s taking them into the digital age. The sports club announced on Feb 19. it would be offering digital trading cards of its players through the blockchain-enabled platform Sorare.

By using Ethereum technology, Sorare will provide digital cards that soccer fans can collect and trade. The cards function like non-fungible tokens and will feature star players like forward Cristiano Ronaldo. 

Used in conjunction with the platform’s fantasy soccer game, the cards can be used to create teams, compete in tournaments for cryptocurrency prizes, and trade in secondary markets. According to Sorare, some of the rare cards have sold for over $2,000. 

In a press release obtained by Cointelegraph, Sorare CEO Nicolas Julia spoke on the new deal:

“We are very proud to have signed this agreement with…


View More Article
Blockchain

United Nations Is Among New Entrants in Forbes’ 2nd Blockchain 50 List

single-image

bitbond bitcoin lending

Newly released Blockchain 50 list by major finance publication Forbes features some new entrants like major international association, the United Nations.

Shortly after including six blockchain-focused firms into its Fintech 50 list last week, Forbes has released another compilation of 50 global enterprises actively embracing blockchain technology.

Newcomers include the United Nations, China Construction Bank, Square and others

Published on Feb. 19, the new Forbes’ Blockchain 50 list is the second release of its annual Blockchain 50, which was first introduced in April 2019. Similarly to last year’s edition, the new compilation includes industry giants like Amazon, Microsoft, JPMorgan, Google, as well as cryptocurrency-focused firms like Bitfury, Coinbase and Ripple.

At the same time, about half of the firms on the list are newcomers, including the UN, the world’s second-largest bank China…


View More Article
Bitcoin

Bitcoin Price Fights to Hold $9.5K to Stave Off a Trend Reversal

single-image

bitbond bitcoin lending

On Feb. 20 Bitcoin (BTC) price surprisingly dropped 8.85%, a move which caught many investors off guard as up to that moment the digital asset had recovered well from the President’s Day weekend correction and was trading sideways in the $10,200 range. Citing data from CoinMetrics, ARK Invest crypto analyst Yassine Elmandjra tweeted that the $1,000 price drop was the fifth largest USD correction to occur on the hourly time frame since 2017.

Picture

Since the sharp downside move, traders, analysts, and crypto-Twitter have been attempting to pinpoint the source of the flash crash and a handful of theories have arisen. Some have attributed the volatility to the consecutive unplanned Binance exchange outages which halted trading on the platform and prevented many traders from being able to log into their accounts.

Others, like, Cointelegraph contributor and…

View More Article
Blockchain

Australian Stock Exchange Has New Blockchain Equity Competitor

single-image

bitbond bitcoin lending

NSX Limited, the operator of the National Stock Exchange of Australia (NSXA), is working on a joint blockchain-based project to enable same-day settlements.

According to a Feb. 20 announcement, NSX has partnered with iSignthis (ISX), a publicly listed firm specializing in payment authentication services, to establish a new venture that would provide “multicurrency, real-time and same day clearing of share trades across multiple exchanges.”

CHESS system will meet new competitor, DESS

Dubbed ClearPay, the new venture will develop a delivery versus payment (DvP) platform that is designed to replace the existing system of clearing and settlement process offered by current traditional domestic and foreign stock exchanges.

Using distributed ledger technology, ClearPay is expected to cut settlement processing time from three days to same-day or early the next day….


View More Article
Bitcoin

Watch Chartist Dan McDermitt Debate Analyst Ronnie Moas on Why Trading Can Beat Hodling

single-image

bitbond bitcoin lending

This week, technical analyst Dan McDermitt of The Chart Guys educational platform debates Standpoint Research founder Ronnie Moas on trading versus holding.

Can traders really outperform a simple buy and hold Bitcoin investment strategy?

McDermitt sees trading as a profitable route. “Had I just bought and held, I would be doing a lot more poorly than my current trading,” he said. McDermitt said trading over the past two and a half years has netted him between 3,000% and 5,000% in profits, whereas simply buying and holding Ethereum would have only yielded 500-600% in the same time frame.

Moas, on the other hand, does not think technical analysis works. Preferring to buy and hold, Moas does not think traders can beat a simple Bitcoin investment. “We’ve had tens of thousands of candles on the Bitcoin chart in the last…


View More Article
Blockchain

Paxos’ DLT Settlement Platform Is Live With Credit Suisse and Instinet

single-image

bitbond bitcoin lending

Paxos, a New York-regulated financial firm and the issuer of a USD-pegged stablecoin, has launched its blockchain-based settlement platform.

After announcing Paxos Settlement Service in late 2019, Paxos Trust Company has launched the product to settle select United States-listed equity trades between the two broker-dealers, Swiss financial services firm Credit Suisse and Nomura Group-owned Instinet, according to a Feb. 20 announcement.

Paxos to apply with the SEC for clearing agency registration later in 2020

As reported, Paxos Settlement Service is being launched under no-action relief from the U.S. major financial regulator, the Securities and Exchange Commission (SEC). The no-action relief means that the agency will take no action against Paxos when the firm starts to roll out its settlement platform.

However, Paxos still plans to submit its application for clearing agency registration with the SEC in 2020 in…


View More Article