Digital Assets Experience Matters Most in Appointing a Third-party Custodian
30 Jun 2021 — Banks and financial institutions rule the traditional custody market, but it seems like FinTechs are currently giving them a run for their money when it comes to providing custody solutions to digital assets.
While in recent times, major custodians i.e. BNY Mellon, Fidelity, Nomura and DBS have begun offering digital assets custody services to institutional clients, most of other traditional players have not started. And even if they were to start now, they would have a long way to go in updating their custodian methods in order to cater for the unique features of digital assets.
Citi and Global Custodian recently collaborated on a survey exploring how institutional investors, their brokers and custodians are engaging with digital assets and what the future holds.
In a digital context, custody involves managing and storing the private keys that control the assets on behalf of the owner. That is not unlike holding physical certificates in bank vaults for clients – the original notion of custody.
From the survey, 47% of the participants including banks, broker-dealers and asset managers said that the most important factor in appointing an external custodian for digital assets is the provider’s experience in digital assets and networks as opposed to only 23% on the experience and reputation of a traditional custody.
What’s more, among asset managers alone, the figure was significantly higher, at 57% pointed to experience in digital assets and networks. Well at least for this now, FinTechs may just have the upper hand when it comes to the provision of digital assets custody service for institutional investors.
However, if traditional securities services providers can acquire the requisite capabilities, whether organically or through partnership with FinTechs, they should be in a position, not only to retain existing clients who move into digital markets, but to attract the custom of new funds and institutions with an exclusively digital focus.
Full report on the survey findings here: https://www.globalcustodian.com/engaging-with-digital-assets/