Bitcoin Investment

Will Cryptocurrency Custody Services Fuel Institutional Demand?

Melanie Kramer | Jul 22, 2018 | 13:00

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Demand for secure cryptocurrency storage services is increasing. Meanwhile, investment managers and exchanges are creating services to meet the demand. Will this, in turn, encourage more high-net-worth and institutional investment in cryptocurrencies? 

Traditional and high-value investors may still be wary of cryptocurrency exchanges, especially considering the frequency of major hacks. Such investors often feel more comfortable with the safe custody of their assets provided by banks and financial institutions.

Institutional investors are also likely to seek out over-the-counter (OTC) services for a more conventional style investment. Because of this, financial institutions new and old are creating OTC desks. Since OTC cryptocurrency transactions are usually of a higher value, demand for digital asset storage is boosted.

Fusang Vault – Hong Kong

The South China Morning Post (SCMP) reports that asset manager Fusang Investment Office — which focuses on Asian private family offices and investments — will launch a crypto-custody service in Hong Kong. “Fusang Vault” is expected late in 2018.

Fusang CEO Henry Chong believes a third party is needed to hold assets and conduct periodic audits. Chong likened digital assets to bearer bonds, with the holder presumed to be the owner and without “registration of ownership information of the security.” He remarked:

Hence, the way we keep digital asset secured is of paramount importance.

According to reports, Fusang Vault is working with insurers to develop cybersecurity insurance coverage for its clients’ cryptocurrency asset storage.

Coinbase Custody

Cryptocurrency exchange Coinbase — as part of its growing suite of professional products designed to attract institutional investors — launched Coinbase Custody on July 2, 2018, for the U.S and Europe. It plans to roll out the service in Asia by the end of the year.

Coinbase Custody requires a minimum balance of $10 million USD for use of the service and is currently “on-boarding” a “set of world-class clients that includes leading crypto hedge funds, exchanges, and ICO teams.” The service includes cold storage for cryptocurrencies and an institutional-grade broker-dealer.

Ledger to Support 100 Coins

Ledger, the cryptocurrency wallet startup from France, is also increasing its crypto-custody services.

The company plans to increase the number of cryptocurrencies its wallet supports from around 25 to 100 by the end of 2019. The expansion, says CEO Eric Larcheveque, is to support institutional investors, hedge funds, and other high-value investors.

The demand for crypto-custody services is being met by key cryptocurrency industry participants and even traditional asset managers. This could serve to demonstrate that the infrastructure and security more high-net-worth individuals and corporate investors need to join the market is being met — bolstering institutional demand.

Do you think more institutionally suited services will encourage investment into cryptocurrencies? Let us know in the comments below! 

Images courtesy of Shutterstock, Wikipedia Commons, Coinbase.