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The connotations of cryptocurrencies stand in stark contrast to those associated with a custodian bank . The former - seen by some as a volatile phenomenon , an outlaw in a world of regulated financial products driven by retail demand and hype , based on math and technology . Nobody really knows how high its ceiling goes , and if its floor is zero , it ’ s moving further away from that possibility with each passing day . Custodians , on the other hand , are perceived as a fortress of safety in a highly regulated space , bound by rules and built on decades of legacy . You ’ d be forgiven for thinking the two are worlds apart . Over the best part of a decade – where Bitcoin , the poster child for crypto , has gone from being able to buy you a pizza to its price equating to that of a new car – traditional custodian banks have kept an eye on the progression of digital assets , without officially wading into the space . However , in recent years , client interest has piqued , and the ventures have begun . From Fidelity to SIX Digital Exchange ( SDX ), each custody initiative has grabbed headlines for two reasons : firstly , because of the aforementioned contrast of the two worlds and secondly , because many see these launches as seals of approval from authoritative figures from the financial services world . The epitome of this has been BNY Melsay the crypto media were excited by this development , with dramatic headlines about the trillion-dollar financial services juggernaut getting into crypto custody . “ Clients prefer to work with a trusted service provider that they have been relying on for all of their traditional assets , and don ’ t want to go elsewhere to gain exposure . What makes our offering more compelling is they can use the full offering of the franchise , starting with custody ,” Demissie told Global Custodian . This launch was different from some of the other ventures we had seen up to this point . BNY Mellon planned to host the service within its organisation and traditional offering , servicing the entire trade lifecycle of a digital asset , including issuance , transferring and safekeeping . “ The offering we have designed is not separate to our traditional offering , as it
“ The business of finance is inherently more pioneering than some might think , it ’ s one that takes risks and innovating , doing things that have never been done before .”
lon ’ s foray into the crypto custody world . On 11 February , BNY Mellon announced it had set up a new unit dedicated to building the industry ’ s first integrated multi-asset digital custody and administration platform to cater for the rapidly evolving digital assets space . The team - led by Mike Demissie , head of advanced solutions at BNY Mellon - will be responsible for accelerating the development of enterprise solutions for digital assets , including cryptocurrencies . It ’ s fair to
After years of speculation , incumbent custodians are launching services around cryptocurrencies leading to widespread excitement among digital asset enthusiasts , along with questions around client interest and the potential of these offerings from the securities services community , writes Jonathan Watkins .
ALEX MANSON , HEAD OF SC VENTURES
is fully interoperable with our other capabilities across collateral management , issuance services and securities lending ,” Caroline Butler , head of custody for BNY Mellon , told Global Custodian “ We view it as an obligation to offer this service , and this asset class is becoming more mainstream alongside traditional assets . Clients don ’ t want to have bifurcated services that doesn ’ t come with the same amount of trust which they have put into BNY . It is important that we build that bridge between the old and new and have a fully-embedded service across the two platforms .”
Here to stay The crypto custody journey among incumbent providers has been an intriguing journey , from hearing Jamie Dimon ’ s view on Bitcoin each year , to waiting to see if BNY Mellon or State Street announce their offering first . What we didn ’ t see coming , was a collaboration between two of the biggest players in the space . Zodia – a new institutional grade cryptocurrency custody offering developed by Northern Trust and Standard Chartered – may be one the most intriguing developments of all , as two major banks embark on a journey into a new world . “ The business of finance is inherently more pioneering than some might think , it ’ s one that takes risks and innovating , doing things that have never been done before ,” said Alex Manson , head of SC Ventures . “ We as a bank were set up to facilitate trade in Asia and our founder was convinced that free trade was essential . He was entrepreneurial , innovative and risk taking . Finance doesn ’ t need be conventional , risk adverse and low impact . It ’ s about relevance for your clients . When a new asset class appears and clients are intrigued by it , just staying back and not engaging isn ’ t conducive to relevance for your clients .” Speaking with Manson , it became clear this isn ’ t about the characteristics of any specific crypto asset itself , it ’ s about the service and the potential of digital assets as a concept . He jokes it ’ s a market in need of “ adult supervision ” and while it ’ s a tongue-in-cheek comment , when it comes to institutional involvement in cryptocurrency , there needs to be familiar
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