One of the main conveniences of Cryptocurrencies is that they exist in a decentralized and deregulated market. However, this also poses a threat, as Cryptocurrencies are difficult to track or recover once they are hacked. This, however, is set to change soon following the planned establishment of regulated custody consortiums.
Overcoming Hacking and Theft Threats
Kyle Samani is a managing partner at Multicoin Capital. His main task is to make money off the crypto market, but his biggest challenge is safeguarding his holdings from hackers. Samani will soon not have to worry about this when regulated custody consortiums roll out. These consortiums have been developed by Cryptocurrency platforms in conjunction with regulators who will be tasked with protecting holding and protecting shareholders’ Cryptocurrencies and other digital assets.
Coinbase Inc. Leading the Way
Coinbase Inc., one of the leading crypto exchange platforms, will be the first to roll out a regulated custodial consortium. The platform is working with a small group of institutional investors to test just how effective its planned consortium will be.
However, Coinbase Inc. is not the only crypto exchange with these plans in mind. Several other platforms already have plans underway. In particular, crypto exchange startups BitGo and Circle are already in talks with regulators. The closest thing to a fully developed consortium is Komainu, a custody consortium platform that is currently being developed by crypto firm Ledger, Global Advisors, and investment bank Nomura Holdings Inc. Komainu is expected to begin private testing by mid-summer, after which the consortium will be open to investors. Among those who will partake in the testing phase include investment management companies, hedge funds, and family offices.
Notable Custodians Onboard
Crypto exchange platforms are working with renowned custodians to develop these consortiums. For instance, Coinbase Inc. is currently in talks with reputable custodians in Wall Street as well as custody technology provider Trustology. BitGo, on the other hand, has already acquired the custodian company Kingdom Trust, and it is currently seeking state-chartered approval in South Dakota.
Other notable regulators that have expressed interest in these ventures include JP Morgan, BNY Mellon, and Northern Trust and State Street Corp.
Overcoming Barriers and Unlocking Vast Opportunities
Fund managers working with Cryptocurrencies are required by the SEC to keep their clients’ funds with qualified custodians. What’s more, most institutional investors have been demanding for custodianship before investing in Cryptocurrencies.
Now that regulated custodial consortiums are expected to roll out, fund managers such as Samani expect numerous profitable opportunities to be unlocked. For starters, about $20 billion worth of Cryptocurrencies will flow into custody consortiums as soon as they become available according to Sam McIngvale, the developer in charge of Coinbase Inc.’s project. Additionally, the security and confidence assured to investors by these custodial consortiums will nurture trust and confidence in Cryptocurrencies, which will consequently result in higher prices and better profit margins. Finally, crypto holders will no longer have to worry about hackers stealing their funds.
Cryptocurrencies are indispensable and the planned development of regulated custodial consortiums is just one of the latest developments to drive this fact home. Although these consortiums are still in development phases, investors and fund managers can harness all their advantages and conveniences as soon as mid-summer.