In the last six months, cryptocurrency industry has grown tremendously as evident from the increase in governments and corporations that have embraced blockchain technology. As a result of this growth, we have noticed a sharp increase in the number of individual businesses and financial institutions such as banks starting to offer cryptocurrency custodian solutions.
What Are Cryptocurrency Custodian Solutions
Cryptocurrency custodian solutions are meant to resolve the problem of crypto wallets and exchange platforms hacking by storing the assets in a secure system. Investors have a peace of mind knowing that all their digital assets are not only secure but also fully insured and under the care of a third party that is trusted and accredited by the government. Concisely, the custodian solutions take away the responsibility of ensuring that cryptocurrencies are safe from the investors.
The increase in number of businesses offering custody solutions is a clear indication that the industry is headed in the right direction. Secondly, the service provider main target customers are the institutional investors such as market intermediaries, family offices, and hedge funds.
The increase is fuelled by the high demand for traditional and well-established custodian who can offer guaranteed storage of cryptocurrencies. Most experts are of the idea that this bridge will help move institutional capital into the cryptocurrency industry in a more secure and transparent way.
Numerous reports indicate that some of the major banks have been conducting pilot tests that are meant to position them for success when they finally start to offer cryptocurrency custody solutions to their customers and the large crypto community.
For example, Swiss based investment bank, Vontobel, recently launched a Digital Asset Vault. This vault is basically a service that is meant to provide more than 100 banks and wealth managers the ability to issue directives for purchase, transfer, and custody of cryptocurrencies that are already integrated in the regulated environment that conventional banks operate in.
Borse Stuttgart, a German stock exchange platform also recently launched a custody service that targets customers who have already invested in cryptocurrencies. Other notable companies that offer the services include Coinbase, Fidelity, and State Street.
Here in the United States, the regulations require all advisers to ensure that their clients’ funds are kept by an accredited and qualified custodian.
On the other hand, the European Securities and Markets Authority (ESMA) have noted a concern that there is no harmonized definition of recording keeping and safekeeping for ownership of securities. What this does is that it makes it challenging to apply custodial requirements to new class of assets such as cryptocurrencies. According to ESMA, there is need for a comprehensive understanding/clarity of the type of activities and services that may qualify to be categorized as custodial under the current European Union financial services rules as stipulated in the DLT framework.
While some experts believe that, the rapid increase in the number of entities offering cryptocurrency custodian solutions does not leverage the value of cryptocurrency. They argue that custodian services are meant for traditional financial banks.
The bottom line is that cryptocurrency custodian solutions are essential to the efficient functioning of financial markets. However, investors need to be protected to ensure that they assets are not misappropriated. Read more cryptocurrency news here.