Crypto custody for institutional investors has once again become top-of-mind for the cryptosphere following the United States Securities and Exchange Commission’s (SEC) October rejection of Bitwise Asset Management’s application for a Bitcoin exchange-traded fund (ETF.)
Indeed, while there are far more viable options for cryptocurrency custody than there have been at times of previous rejections, SEC Chairman Jay Clayton still raised his concerns regarding crypto custody just weeks before the decision to reject the application was made.
Discover iFX EXPO Asia 2020 in Macao – The Largest Financial B2B Expo
Indeed, Clayton told CNBC reporter Bob Pisani that while the crypto industry has come closer to satisfying the SEC’s concerns regarding custody, “there’s work left to be done.”
“How do we know that we can have custody and have a hold of these crypto assets? That’s a key question,” the Chairman asked.
Custody has always been a pain point for the industry–but are institutional investors using the viable custody options that are increasingly available?
Previously, in July, the SEC and FINRA issued a joint statement delineating their concerns about crypto custody: “the ability of a broker-dealer to comply with aspects of the Customer Protection Rule is greatly facilitated by established laws and practices regarding the loss or theft of a security, that may not be available or effective in the case of certain digital assets,” the statement read.
And indeed, though the situation has improved, a lack of viable crypto custody options has historically been a major pain point for the industry when it comes to institutional adoption. Indeed, a number of analysts have argued that once the right custody solutions are available, a wave of institutional capital could come rushing into the cryptosphere
However, although things have improved since 2018 (the institutional crypto custody space now has well-renowned participants like Fidelity, Coinbase, and ICE’s Bakkt), a recent study conducted by Binance Research found that institutional investors don’t seem to be using these custody services; instead, 92% of the institutional investors that responded to Binance’s survey said that they prefer to keep their crypto exactly where most experts least recommend–on centralized exchanges.
Nice work to the entire @DigitalAssets team!
As a NY trust company, FDAS can provide execution and custody of crypto assets so institutional clients can buy, sell and transfer $BTC
Reminder that Fidelity has over $7 trillion+ in assets under its administration.
— Tom Shaughnessy (@Shaughnessy119) November 19, 2019