It seems to have become the newest trend causing a buzz in the crypto kingdom. These services are designed to pave the way for virtual currencies to get securely held in big volumes. Some proponents are convinced that this might be a major influence that will trigger an influx of new capital from various institutional investors.
Most of the solutions available in the current market make use of cold and hot storage. In the case of ‘Hot Storage,’ the coins and tokens are kept in an environment that is accessible via the internet. Although it is easier to access the assets, it also means that there is an elevated risk that the involved funds may be stolen via a cyber attack.
On the other hand, cold storage is a method of storing digital currencies away from all online connections. Theoretically, the cold storage strategies are more secure since there is a lower risk of the assets being stolen in hacks and cyber attacks. Nevertheless, cases like QuadrigaCX have shown that this strategy does not guarantee a cast-iron security mechanism for the funds.
Advantages of Crypto Custody
In theory, it is suggested that this form of storage can help investors ensure that their assets are not lost. Forgetting a private key is highly calamitous in the digital currencies’ world. Tokens like Ether and Bitcoin can be lost forever without that all-important alphanumeric phrase.
Crypto custody solutions are designed to provide an experience that is similar to mainstream banking. They are developed to store large volumes of cryptocurrencies insured and secure. Just like the PIN code for a debit card can be replaced whenever it is lost, crypto custody accounts also ensure that the funds that they protect will never vanish into thin air.
Who Do Crypto Custody Services Target?
The hedge funds that have a huge stake in cryptos are not the only potential beneficiaries of these services. The market is gradually proving useful for retail investors as the exchanges offer the centralized strategy that most everyday consumers are used to.
The benefits of these crypto custody accounts are obvious from a regulatory point of view. The US Securities and Exchange Commission (SEC) is clear that any aspiring institutional investor that holds at least $150,000 in assets must ensure that they operate under the control of a ‘qualified custodian.’
Who Are The Early Market Leaders?
So far, very few crypto-focused entities have come up in this space. Coinbase appears to be gearing up as an early investment leader providing institutional-grade solutions. Other notable early investors include Vontobel. This company has already established a ‘digital asset vault’ supporting over 100 banks and wealth managers in the orchestration of the purchase.
Furthermore, the vault enables these managers and banks to use the custody services and transfer coins and tokens via the system and environment that they have become accustomed to currently. Several of the Venture capital firms including Andreessen Horowitz have come out in support of crypto custody upstarts like Anchorage.
Also, Bakkt has also made progress in offering Wall Street investors with methods of trading BTC in a regulated environment. Other famous names like Gemini and Fidelity have also launched offerings that aim to serve institutional users.
Will Crypto Services Go Mainstream?
Another significant development that came at the start of December was when Germany’s parliament passed a law. The new law enables banks in the country to offer custodian services and sell cryptos. Many proponents allege that the bill will open the way for Europe’s biggest economy to turn into a crypto haven.
On the other hand, others fear that it could open up new risks to customers. One notable scenario that is causing jitters among investors is that the public will start to invest in volatile tokens without understanding all the risks involved. That may lead to a potential loss of investments as a result.
What Is The Future For Crypto Custody?
Regulators, financial institutions, and investors are continuing to explore the world of crypto custody. Listening to the experts in the field can help investors determine what lies ahead. The Crypto Finance Conference scheduled for January 15 to January 17 at the Swiss ski resort of St. Moritz will offer an excellent platform. There is expected to be a lively debate and intelligence about different opportunities and hiccups that lie ahead for the sector in the 2020s.
Cameron and Tyler Winklevoss twins serving as president and CEO of Gemini are some of the speakers at the event. Also, the commissioner of the U.S. Securities and Exchange Commission, Hester Pierce, will be a keynote speaker at the meeting.
The main agenda of the conference is to explore the quick evolution of the asset management sector and how cryptocurrency fits into this landscape. Also, the challenges of banking in the blockchain world will be discussed.
For any investor seeking to get new contacts in the infinite setting, and the ability to ask influential figures questions about crypto custody, the invite-only event is an integral part of the year.