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Shortly after the filing emerged , State Street ’ s digital asset head , Nadine Chakar , commented this is why you have “ the big kids at the table ”, during Fund Forum in Monaco . “ There are 260 firms running around the world claiming they provide custody ,” she added . “ Today the largest crypto custodian announced if they go bankrupt , then all of its assets go with them . “ Just offering custody , setting up shop and being a custodian is not the way forward . People are scared , ‘ no key no coin ’. In today ’ s world … who is accountable for the safety and soundness of the system ?” While custodians have criticised Coinbase , the reality is a bit more complicated . Wright says the disclosure by Coinbase in its accounts serves as a reminder about the importance of counterparty risk for institutions trading crypto , but adds this particular issue is not unique to Coinbase . He explains that SEC Staff Accounting Bulletin 121 – which was issued in April 2022 – directs any crypto-asset custodian to present a liability on its balance sheet to reflect its obligation to safeguard crypto-assets held for its platform users . “ The SEC has said it expects these disclosures to be made by all businesses that custody crypto-assets no later than in financial statements covering the first interim or annual period after 15 June . This will apply to traditional custodians , as well as non-traditional custodians , unless they are based in a jurisdiction that has clarified the ownership of digital assets in law ,” says Wright . Swen Werner , managing director , global head of digital custody at State Street , says the underlying issue around crypto-asset segregation is not an organisational one , but a regulatory problem . Werner notes there is regulatory uncertainty facing the industry about the effectiveness of asset segregation for cryptoassets compared to traditional assets , adding this is something which needs to be addressed . Although standalone crypto-custodians have faced their fair share of opprobrium , Quaglini says the market is more institutionalised than what it once was . “ Several years ago , institutional investors would fail most standalone cryptocustodians during their due diligences on the grounds that they did not have a three-year audited financial track record . Today , the most reputable crypto-custodians adhere to best practices around KYC [ know your customer ], AML [ anti-money
“ The challenges of setting up and generating revenues is not for the faint hearted or those with limited resources .”
JASON NABI , CHIEF REVENUE OFFICER , BOSONIC
laundering ] and risk management and are recognised by tier one regulators and institutional investors alike ,” continues Quaglini . Others agree that the standalone crypto-custody market is increasingly mature . “ Coinbase Custody is an independent qualified custodian under the Investment Advisors Act and is a fiduciary under New York State Banking law ,” explains Kelly Pettersen , senior manager , institutional sales and trading , EMEA at Coinbase . “ Crypto assets are held in segregated accounts in the name of our institutional clients . We are a money
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