New launches for Cryptocurrency custody services are growing exponentially as many developers are taking advantage of the growing demand. The main customers for these platforms are market intermediaries, family offices, and hedge funds that mainly target institutional investors and high net worth retail investors. To these Crypto service providers, security is paramount and central to their businesses sustainability and Crypto custody services offer exactly that.
The leading providers of Cryptocurrency custody services include banks and private enterprises. They serve as trusted third parties whose core responsibility is to offer security and insurance of Digital Tokens that are highly sought after by hackers and dark web criminals.
Cryptocurrency Custody Services Will Enable Institutions To Invest In Cryptos
According to a study by the Bank of New York Mellon, the demand for Digital Tokens custody services is increasing by the day as Crypto holders search for a traditional and trusted option for storage of Cryptocurrencies. This is because there have been reports of hackings where Crypto wallets have been breached and millions worth of Tokens stolen by hackers never to be recovered.
This risk has been attributed as one of the factors that hamper institutional adoption of Cryptocurrencies. However, with increased custody solutions especially from trusted traditional institutions such as banks, more investors will have the confidence to own Cryptos such as BTC, ETH, XRP, Dash, ADA, LTC, and over 2,000 others.
Banks participation in Crypto custody services is mainly aimed at diversifying product portfolios to grow the profit margins. From the Cryptocurrency industry standpoint, the impact is even greater both in the short-term and the long-term periods.
For example, Vontobel, a Swiss investment bank unveiled a ‘Digital Asset Vault’ for its clients. The service is available to clients of over 100 banks and wealth managers and is fully integrated with the bank’s infrastructure.
Non-banking institutions such as German stock exchange Börse Stuttgart, Coinbase, Fidelity, State Street also offer the service and the list is growing.
According to Paul Puey, the CEO of cryptocurrency wallet Edge, more banks will start to offer Crypto custody services. However, he believes that this would not be very disruptive due to stiff competition from Cryptocurrency wallet developers who are offering more secure storages for private keys. However, the custodial services are still important as they offer alternatives especially to vulnerable clients such as institutions with high volumes of Digital Tokens.
Cryptocurrency Custodial Solutions Are Supported By Regulators
In the USA, SEC policies require advisors to secure clients’ Cryptocurrencies with a qualified custody platform. In the EU, the European Securities and Markets Authority (ESMA) is concerned that there are no laws that guide safekeeping of securities which include Tokens. Hence, there is an ongoing process of policy formulation at the EU government level that will cover Cryptocurrency custody services.
Additionally, according to the CEO of Coolbitx Michael Ou, Cryptocurrency custody solutions ensure that there is widespread compliance especially in regards to AML and KYC standards in the Cryptocurrency industry. These are some of the deepest concerns to regulators as a lapse in their enforcement makes Cryptocurrency-based transactions vulnerable to misuse by money launderers or terrorists.