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market infrastructure in place . “ We have an amount of conviction that digital assets are here to stay – not specific to any kind of product – but this will only continue to gain in importance ,” he adds . “ However , this is a market where the market cap is dominated by retail investors who are experimenting with the asset class and in order for institutional investors to enter the market , they require the infrastructure .”
Keeping up pace If we go back to the comparisons between cryptocurrencies and custodians , we can add speed into the opposing traits . While you could view creating Zodia outside of the bank itself as a risk mitigation move , the motive is more to be able to create an entity that can move at an equivalent pace to the fast-moving crypto space and innovate in isolation , while leaning on the principles of the bank itself . “ What we didn ’ t want the standalone entity to lose is the governance that we introduce as a bank . From a risk perspective , our main concern was to have the freedom to develop it at the pace we wanted to ,” explained Justin Chapman , global head of market advocacy and innovation , global executive securities services , Northern Trust . “ In terms of the risk of the asset , we ’ re looking at having this entity adhere to bank standards , KYC , AML , development standards akin to the banks . We ’ re not looking at it as a risk mitigation away from the firms , but more of the upside of identifying new talent , to be more flexible in terms of developing a new business model and allow that company to grow quicker . The management team will have full autonomy to do that , but our board will provide custody and guidance expertise , and also have oversight . “ As we look to create the institutional stack , we ’ re taking the advantages of the technology and the asset class opportunity , but then applying the discipline of our market and counterparty practices . We do feel the asset class has been around long enough that it ’ s no longer the ‘ Wild West ’ and there are a lot of large financial institutions out there that want to create asset classes and products wrapped around digital currencies .” All the boxes seem to be ticked with Zodia : the influence of two major and well-established custodian banking institutions , working with the freedom of flexibility , adaptability and speed , while benefiting from a DNA of safety and required scrutiny . What really stands out is that this is a collaboration between two
“ As of today , we see traditional institutional investors like investment funds , venture capital and asset managers investing already in some crypto assets .”
JAVIER RUBIO , HEAD OF BUSINESS DEVELOPMENT , BBVA SWITZERLAND
48 Global Custodian Spring 2021