Regulated Crypto Custody Is (Almost) Here. It’s a Game Changer

June 21, 2018

One of the biggest headaches for cryptocurrency hedge fund managers is ensuring their holdings aren’t stolen. That task may be able to be offloaded soon. There's a small group of institutional investors who have been testing Coinbase Inc.’s new crypto-custody service, one of scores of such offerings in development. Some services are now almost ready -- with huge implications for the market’s future. “There are a lot of investors where custodianship was the final barrier,” Hedge fund manager Kyle Samani said in a phone interview. “Over the next year, the market will come to recognize that custodianship is a solved problem. This will unlock a big wave of capital.” About $20 billion in crypto assets are poised to flow into custody services once they’re available, estimates Sam McIngvale, who’s leading Coinbase’s project. Coinbase expects to win approval soon to serve clients requiring a so-called qualified custodian that meets tough U.S. standards for guarding assets, according to a spokesman. It’s among crypto startups including Circle and BitGo that have been talking with regulators. In May, investment bank Nomura Holdings Inc. joined crypto firms Ledger and Global Advisors to create a custody consortium called Komainu. And at least three giant Wall Street custodians -- Bank of New York Mellon Corp., JPMorgan Chase & Co. and Northern Trust Corp. -- are working on crypto-custody services or exploring it, people briefed on their efforts said.

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