Regulated Crypto Custody is Nearly Here – And It Could Revolutionize the Industry As We Know It
Regulated crypto custody services will soon be available across the cryptocurrency industry. A report from Bloomberg published earlier today describes the arrival of regulated crypto custody services as “a game changer” that will have “huge implications for the market’s future.”
The reason regulated crypto custody services will have a huge impact is simple: a growing number of high net worth individuals and institutional investors are getting involved in cryptocurrencies. However, these participants struggle to ensure the security of their funds.
Today, companies like Coinbase, Inc. are trying to change that. Coinbase Inc. recently launched its new crypto custody service. Bloomberg describes Coinbase’s service as “one of scores of such offerings in development.”
“Some services are now almost ready,” explains Bloomberg, “with huge implications for the market’s future.”
Coinbase expects to win approval in the near future that would allow it to be a qualified custodian. In order to be a qualified custodian, Coinbase needs to meet tough US standards for guarding assets. BitGo has also reportedly filed an application to be a regulated crypto custody service.
If either of these companies wins approval as a regulated crypto custody service, it could revolutionize the crypto industry overnight. Institutional investors and hedge funds would instantly have a safe and easy way to access the digital currency industry.
JPMorgan and Other Wall Street Banks Are Also Working on Crypto Custody Services
Coinbase is one of the best-known crypto custody services catering to institutional investors today. However, there are other services in development.
Circle and BitGo, for example, both offer crypto custody services today. According to the Bloomberg report, both BitGo and Circle and speaking with regulators. Like Coinbase, they’re seeking to become a regulated crypto custody service.
Meanwhile, a crypto custody service called Komainu was launched back in May 2018. Komainu is a joint venture between Nomura Holdings Inc., an investment bank, and crypto firms Ledger and Global Advisors.
Beyond the crypto industry, however, major Wall Street names have jumped on board. Bloomberg reports “at least three giant Wall Street custodians” are working on crypto custody services or exploring the option. Bloomberg cited “people briefed on their efforts”.
The three Wall Street names rumored to be developing crypto custody services include Bank of New York Mellon Corp, JPMorgan Chase & Co., and Northern Trust Corp.
Regulated Crypto Custody Services Could Cause Markets to Surge
A regulated crypto custody service could cause markets to surge. As prices have flagged the last few months, a regulated crypto custody service could change the game.
Regulated custody services would allow investors to expand into crypto. Institutional investors could participate in markets without compromising the security of their funds. Hedge funds, pension funds, and similar investment vehicles could invest a fraction of their portfolio into the crypto industry.
Retail brokerages would also be more likely to jump on board with crypto. A retail brokerage could offer crypto as a safe and easy investment opportunity – just like they offer stocks and bonds within the platform.
How much is all of this money worth? How much money can we expect to flood into crypto once regulated crypto custody services emerge? Bloomberg cites Coinbase’s Sam Mcingvale:
“About $20 billion in crypto assets are poised to flow into custody services once they’re available, estimates Sam McIngvale, who’s leading Coinbase’s project. The figure has been ticking higher in recent months, despite Bitcoin’s downward trend, as startups hold initial coin offerings, pumping their own tokens into the market.”
Any time a major Wall Street name like BNY Mellon or JPMorgan Chase jumps on board, it’s good news for the crypto industry. Customers have trusted these companies with their wealth for decades. The launch of a regulated crypto custody service from BNY Mellon could change the industry overnight.
When Will We See a Regulated Crypto Custody Service?
The next question is: when will regulators approve a crypto custody service? We already have crypto custody services from companies like Coinbase. Now, we’re waiting for regulators to approve these services.
BitGo claims they filed their application “some time ago now”, according to the Bloomberg report. However, they don’t know if or when their application will be approved.
We already have basic details about how regulated crypto custody services will work. Coinbase, for example, has made it clear regulated crypto custody won’t be cheap. Coinbase charges a $100,000 setup fee plus 10 basis points per month. They also require a minimum balance of $10 million.
As the number of regulated crypto custody services expands, however, we can expect prices to drop.
Ultimately, it’s always a good thing when institutional investors have a safe place to store their money. Up to now, the crypto industry has never had that option. With regulated cryptocurrency exchanges just around the corner, institutional money could soon come flooding into the digital currency industry.