Higher Cryptocurrency Trading Brings Increased Demand for Crypto Custodian Services
The Fusang Investment Office, an Asian asset management company is preparing to launch a crypto-custody service for high-net-worth and institutional clients as reported by the South China Morning Post. The service is to be named ‘Fusang Vault’ to accommodate the storage of large bitcoin transactions as well as other crypto.
The crypto custodian will be like a custodian bank in conventional finance - in the way that a third party is required to hold the cryptocurrency and audit them. Digital assets do not have registration of ownership attached to them making the security of the asset of high importance. When you sell bitcoin or cash out crypto, there is the immutable ledger that records the transactions, but no transfer of ownership.
More and more transactions are happening over the counter separate from exchanges as trading increases and financial institutions draw closer. The need for a custodian service within crypto is echoed as hedge funds and asset managers look towards investing in cryptocurrency.
Coinbase, a leading crypto-exchange, recently expanded into this market with ‘Coinbase Custody’, a service to designed to safeguard and control digital assets through support for multiple signers for fund transfers, setting withdrawal limits and providing audit trails.
There are still a lot of legal issues surrounding custodian services within crypto as Jolyon Ellwood-Russell, a partner at Simmons & Simmons, explained to the South China Morning Post: “Just having segregated accounts does not automatically mean that on an insolvency the investors assets will be protected or recoverable from a receiver or liquidator”. This suggests that that investors assets will still not be fully protected.
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