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Gazprombank Announces Launch of Crypto Custody Service By Mid-2019

Gazprombank, the banking division of Russian giant Gazprom is working with Avaloq and Metaco to provide crypto asset custody services for institutional clients next year.

According to an official press release issued on 6 December, METACO expressed that the strategic decision is part of a joint effort that has been going on for some time. They are also confident that this service will start operating in the second quarter of next year:

Fintech leader Avaloq and crypto-asset custody infrastructure specialist METACO* have entered into an innovation partnership with Gazprombank (Switzerland) Ltd, a Swiss bank, to implement their integrated crypto asset solution. This product innovation aims to provide banks and wealth managers with a fully integrated solution for the management of client portfolios across all asset classes including cryptocurrencies. Gazprombank (Switzerland) Ltd, which is already an Avaloq client, aims to offer a cryptocurrency service to its clients in mid-2019.

According to information from the three firms involved, the service will focus on security. For this purpose, Gazprombank will develop a product using the SILO technology, a “highly secure crypto-asset custody solution for institutional clients” created by METACO. In turn, this product will run within the Avaloq Banking Suite.

Part of METACO team during SILO’s launch

Gazprom is Entering The Crypto-Verse With a Secure, User-Friendly Custody Service

Thomas Beck, Group CTO at Avaloq, assured that the partnership will offer a product not only with high-quality standards but also highly user-friendly.

For both institutions and bank clients, trust is key. Avaloq and METACO have considered this for the development of a fully integrated solution that can be offered to clients by their trusted bank. Thanks to the close integration of the METACO storage solution, banking and wealth management customers won’t have to trust additional third parties when trading with cryptocurrencies. By bringing together all asset classes in one portfolio view, the solution will also ensure the highest levels of convenience and usability.

Despite maintaining a stance sometimes contrary to the use of cryptocurrencies, Russian policy has shown great interest in the development of blockchain technologies. As Gazprom is a key industry for the Russian economy (Gazprom is the leading supplier of gas in Europe), it is possible that this decision will lighten the harsh vision of the state in this regard.

It is also important to note that Gazprombank is a company domiciled in Switzerland, so there are no legal problems that could complicate the operation of the new crypto custody service.

The post Gazprombank Announces Launch of Crypto Custody Service By Mid-2019 appeared first on Ethereum World News.

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Goldman Sachs Could Support Crypto Custody In The Near Future

Cryptocurrency custody services are seen by many as the next step for institutional adoption. As per a Bloomberg report released on Monday morning, Goldman Sachs, one of the most respected financial institutions in the world, is considering the creation of an in-house custody service.

This news comes only a few months after Goldman Sachs began to trade Bitcoin futures for its clients, with this being the first substantial move that the firm took to back the crypto industry.

Citing people familiar with the matter, Bloomberg journalists pointed out that this service, if created, would be aimed at clients (likely institutional investors/firms) looking to safeguard their valuable crypto-asset investments from cyberattacking attempts. The unnamed insiders clarified that no solid plan is set in place yet, adding that there also isn’t a definitive timeline for the development and potential release of this service.

While custody doesn’t sound like much on the surface, it is likely that the release of a fully fledged Goldman-backed crypto service would hail in the next round of institutional involvement, likely pushing innovation and prices in this nascent industry to new all-time highs.

However, a custody service may not be the be all and end all of the firm’s crypto-related aspirations. The insiders went on to note that a successful custody offering could lead the New York-based financial giant to launch other crypto-focused ventures, such as a prime brokerage in upcoming years.

While neither confirming or denying the existence of a move towards custody, a representative of Goldman Sachs stated:

“In response to client interest in various digital products we are exploring how best to serve them in this space. At this point we have not reached a conclusion on the scope of our digital asset offering.”

Oddly enough, this news comes only a few days after the firm’s investment strategy group (ISG) revealed that they hold an aversion to cryptocurrencies. In a report from Goldman’s ISG, investment officers at the firm noted that they expect cryptocurrency values to decline moving into the future, adding that cryptos do not hold the prerequisites required to be classified as bona-fide currencies.

While this was an overall set of bearish sentiment, Nathaniel Popper, the author of Digital Gold and a well-known journalist at the New York Times, pointed out that this is only the sentiment held by one portion of the firm’s expansive employee base.

Goldman Isn’t The Only Wall Street Firm To Step Into The Crypto Boxing Ring

It is important to note that Goldman is not the only legacy market-centric firm to make a foray into cryptocurrency-related products, or custody to be more specific.

As reported by Ethereum World News in early-June, Fidelity Investments, an American finanical services firm with $2.5 trillion under management, has begun work on a “first-in-class custodian service for Bitcoin and other digital currencies.”

Pete Chercewich, the President of Northern Trust’s corporate and institutional services subsidiary,  told Bloomberg that his firm has also begun to develop a method of reliably securing crypto assets. The executive of the financial giant also noted that the plan is to offer custody support at industry-low fees, beating out the relatively high cost of alternative institutional-focused security solutions.

While taking into account the moves made by a multitude of Wall Street firms, it becomes apparent that Goldman may have some competition to deal with when it comes to offering the most reliable crypto services, for the most affordable prices.

Image Courtesy of Jason Baker/Flickr

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Hong Kong Investment Firm To Launch Crypto Custody Service For Institutional Investors

Hong Kong Investment Firm To Open Custody Service 

The South China Morning Post, a Hong Kong-based news source for English readers, recently revealed that a Hong Kong-based firm will be opening up a crypto-custody service in the near future.

According to the aforementioned news source, Funsang Investment Office, which is an asset management firm, has been receiving mounting interest about cryptocurrencies from its vast array of high-net-worth individuals and institutional clients.

This interest has prompted the management firm to begin discussing plans for a custody service, which Fusang’s CEO expects to open it in the fourth quarter of this year.

Henry Chong, the Chief Executive Officer of the firm, elaborated on the plans for service, stating that “Fusang Vault,” as the project is now called, will hold crypto assets for clients, while also auditing the funds on a periodic basis.

Chong went on to talk about why a service like Fusang Vault is needed, drawing connections between financial bonds and cryptos, further noting that crypto assets lack ownership data, unlike something like a land deed. He stated:

“Digital assets are akin to bearer bonds, whereby whoever that is holding the security is presumed to be the owner and there is no registration of ownership information of the security. Hence, the way we keep digital asset [sic] secured is of paramount importance.”

The CEO also pointed out that his firm is currently working with insurers, attempting to work out a system where client’s crypto assets can be covered under new insurance policies.

Growing Need For Institutional Investor Services, Especially in Asia

Institutional investment and interest have long been held as the holy grail of cryptocurrencies, with many expecting that an influx of institutional capital will bring this industry to the mainstream.

However, this industry currently doesn’t have the proper infrastructure to host many institutional clients. Additionally, the current state of the market encourages speculative behaviors, with a majority of retail investors looking to make a quick buck. Institutional investors, like the many notable Wall Street investment firms, have seen that, and have mostly shied away from opening their wallets for the industry.

But institutional sentiment regarding this market is quickly changing, with firms like Coinbase, Blockchain, and Circle all opening up services aimed at attracting investors from legacy markets. These services have already been met with success, despite their youth, with Coinbase Custody already reporting millions under management and Circle seeing billions in trade volume each and every month.

But as pointed out by Blockchain CEO Peter Smith, a majority of institutional clients are currently based in the U.S. and Western Europe, essentially leaving out the Asian market.

Despite being seen as the home of cryptocurrencies, institutional firms based in Asia have hesitated to invest into the cryptocurrency industry. This is why a service like Fusang Vault is important, opening up the industry to an array of new investors and institutional capital.

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100 Tokens By 2020: Ledger Pledges Big Expansion for Crypto Custody

The race among crypto custodians to secure high-end clients is growing fiercer by the day.

Ledger, the France-based wallet and custody startup, is ramping up the number of cryptocurrencies it supports to meet the demand for multi-coin solutions, particularly from institutional investors.  

Revealed exclusively to CoinDesk, the company will add support for new crypto assets on the first Tuesday of each month, starting in August, with a goal of having more than 100 supported by the end of 2019. Currently, Ledger’s products and services handle only about two dozen tokens, and this week it’s adding support for tron (TRX) and zcoin (XZC).

The move is yet another sign of how the cryptocurrency industry is rapidly evolving, with an ever-widening array of assets to choose from and big-money players nosing around for investment opportunities and influencing companies’ business decisions.

While Ledger, founded in 2014, is primarily known for its hardware wallet and corresponding app for individual bitcoin users, CEO Eric Larcheveque cited its newer business lines – which offer custody services to hedge funds and other big players – as the driver behind this “Token Tuesdays” initiative. 

“If we want to sign those [institutional] customers, we don’t have a choice,” Larcheveque told CoinDesk. “We have to support the top 100 cryptos, minimum.”

For similar reasons, BitGo recently added support for 57 ethereum-based assets to its custody services for institutions. Meanwhile, thousands of wealthy accredited investors are on a waiting list for the crypto key management startup Casa, which is scheduled to release its self-managed bitcoin solution in August and eventually add other tokens.

In turn, however, Larcheveque predicted offering custodial support for a wider range of tokens could bring would-be whales off the sidelines, saying:

“This will allow hundreds of hedge funds to deploy their capital into crypto, and enable all these other financial institutions to move billions into crypto.”

Further, Ledger president Pascal Gauthier said bringing traditional players into the wider crypto ecosystem would bolster bitcoin’s real-world value, even if these investors ultimately buy other crypto assets. After all, the world’s largest cryptocurrency is still one of the largest liquidity conduits for cashing out tokens.

More broadly, “institutions coming into this industry means that there is even more trust and it brings more value to the industry,” Gauthier said.

A rising tide…

As Ledger courts institutions, it aims to do so in a way that enhances the hardware wallet’s utility for retail investors as well.

“I would say that the major drive for crypto integration, in the end, comes from the needs of our enterprise customers,” said Larcheveque. “At the same time, it profits our hardware wallet users. It’s a virtuous circle.”

For example, this week the startup also unveiled an upgraded version of the hardware wallet’s companion app. Unlike its predecessor, which was really several apps in one, the new Ledger Live automatically pushes updates to all parts of the app, so the company can add support for new tokens faster.  

Now, it’s much easier to imagine adding dozens of cryptos in just one year to meet Ledger’s business goals. At the same time, individual users can now manage different assets in one place rather than switching from one app to another.

“We really want to cover the maximum amount of cryptocurrencies,” said Larcheveque. “The Live [app] is the first step in this direction because it will give us a new foundation, a new platform, where we can add as much crypto as we want.”

App usage is growing faster than demand for Ledger’s hardware wallets, of which the company has sold over one million units. Larchevêque said the app, which can be used without the wallet, grew from 100,000 monthly users in November 2017 to 500,000 monthly users today.  

Open-source tools for Ledger Live also allow external communities to build support features for their favorite crypto. “Then we can publish them [support features] after review,” Larcheveque said. “Thanks to the community work by all these developers, we can scale much faster by adding new cryptos.”

Indeed, according to Tron’s head of engineering, Tian Han, Ledger’s new tron support was spurred in part by user-submitted code, although his organization also provided financial assistance. 

“Users got together to form a team to build the implementation. Tron employees weren’t involved aside from giving a grant,” Han told CoinDesk. “We also awarded an $80,000 grant to the Ledger Wallet integration team members, and have future grants planned for Trezor Integration as well.”

Self-custody tradeoffs

To some, the rush to offer token custody solutions to Wall Street incumbents may seem hard to square with the crypto community’s “be your own bank” philosophy.

But Ledger actually has two business lines targeting institutional investors. One is a series of partnerships with organizations such as Nomura Bank in Japan, which uses Ledger’s tools for full-custody services, more akin to a traditional deposit.

The other is called the Vault, an enterprise-grade custody solution for teams at an institution, like traders at a hedge fund, to self-manage crypto assets, an arrangement that’s more in line with the crypto community’s ethos. This multi-signature wallet is connected to many individual hardware devices for each team member.

“They are being their own bank just like with the Nano S [Ledger’s hardware wallet] you are being your own bank as an individual,” Gauthier said. “The different managers that are signing off on the transactions will all have a device”

So far, this self-custody approach appears to be rare, though. Typically, institutions don’t want to manage their own private keys, and even some that do so don’t want to be completely self-reliant.

“The best solution is I have a key, my partner has a key, and some guy that I’ve never heard before has a key,” said Travis Kling, co-founder of Ikigai Asset Management, a hedge fund that uses BitGo in this way.

In the view of Jameson Lopp, an infrastructure engineer at Casa, institutions are applying “old world” ideas about custody to these new digital assets.

Although full-custody services don’t align with Lopp’s philosophy of self-reliance, he acknowledged the need for a spectrum of services and healthy competition between companies like Casa, Ledger, and BitGo. He told CoinDesk:

“It’s perfectly fine if people choose to trust a third party. But the whole reason we got into this system in the first place is that people don’t have to do that if they don’t want to.”

Eric Larcheveque image courtesy of Ledger

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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BitGo Adds 57 Ethereum Tokens In Largest-Ever Custody Service Expansion

The wider world of crypto tokens is becoming a bit more accessible to institutional investors.

The security startup BitGo exclusively told CoinDesk on Tuesday, July 10, it will expand its suite of custody products and services to support 57 new ethereum assets, a move driven by demand for services that safeguard private keys – the alphanumeric strings that act as passwords for crypto assets – and that, once lost, are gone forever.

As such, the move is a telling one for the blockchain security sector, one that showcases how it’s in the midst of a changing competitive landscape.

Founded in 2013, BitGo has become an industry leader managing wallets at crypto exchanges, but to date, its service has been limited to larger protocols like bitcoin and ethereum. (Indeed, the overall lack of options has even led traditional custodians like BNY Mellon, JPMorgan and Northern Trust to consider the business, sources told Bloomberg in June.)

The startup is hardly the only industry upstart rushing to debut institutional custody services – U.S. exchange provider Coinbase, the Swiss startup Smart Valor and Japanese bank Nomura are just three of the companies rolling out licensed crypto storage solutions.

Yet the addition of ethereum tokens could be a key first-move advantage. According to BitGo CTO Benedict Chan, there has been a surge in demand for custody solutions for alternative crypto assets such as the kind it’s now adding.

Benedict Chan, CTO of BitGo, told CoinDesk:

“These institutions, they generally don’t want to self-manage their coins. They are looking for someone that can support multiple coins.”

Timothy Furey, CFA and head of banking at Satis Group, a firm focused on advising institutions on ICO investments, described this blockchain industry trend as an “arms race” to offer institutional-grade custody solutions for a spectrum of assets.

That’s why VP of product marketing, Robin Verderosa, said BitGo is now looking to obtain a BitLicense in New York and a qualified custodian license in South Dakota. BitGo aims to offer even more custodial services, adding more than 100 cryptocurrencies by the end of 2018.

Verderosa said courting institutional investors has become BitGo’s priority, adding:

“What we’ve learned is that they’re interested in investing in a basket of coins and tokens that kind of help hedge the market and give better returns.”

Token roulette

Equally notable to the potential industry impact, though, is how BitGo is taking steps to ensure the quality of its service given the risks inherent in dealing with smaller cryptocurrencies.

When BitGo debuts support for dozens of cryptos today, it will include those offered by Kin by the chat messaging app Kik, several native tokens for decentralized crypto exchanges and the blockchain identity crypto Civic, a startup BitGo began experimenting with in 2017.

It’s a reality that’s had an impact operationally, as product manager Isaac Eleftheriadis now heads an 11-person BitGo team focused on rising cryptocurrencies and tokens.

According to Eleftheriadis, every token added in this first batch was explicitly requested by BitGo’s institutional clients. Once there’s an obvious demand for custody options, the team researches this token to make sure its issuers and founding team are reputable.

Long after adding basic storage features, support for crypto tokens requires ongoing vigilance.

“An added challenge for custodians who are coming to market is figuring out how they will handle issues like airdrops, hard forks, etc, and which ones they will support. This presents real technical challenges in addition to regulatory and tax-related ones,” said Arianna Simpson, former BitGo employee and current founder of the crypto investment fund Autonomous Partners.

Speaking to this point, Eleftheriadis told CoinDesk his team actively monitors whether token issuers are planning code changes, in addition to quarterly security evaluations.

Some token issuers themselves have also become BitGo clients.

“There’s been cases were customers asked us to support their ERC-20 token,” Eleftheriadis said. “They don’t want to do the ICO yet until all their tokens can be held by BitGo.”

Other security efforts

Aside from BitGo, there are several startups in the race to serve institutional crypto investors.

Smart Valor CEO Olga Feldmeier spearheads one such provider, a licensed investment platform which also offers custody and management services. She agreed with Chan that many high net-worth individuals and institutions would prefer a licensed expert handle storage and security.

That’s why Smart Valor is partnering with the hardware wallet maker Ledger to offer on-site storage of private keys and other services comparable with deposits at a bank. This Swiss platform for managing and trading tokenized assets is scheduled to launch in September, around the same time as Smart Valor’s ICO.

“A lot of family offices are starting to think about investing directly in ICOs and protocol tokens,” Feldmeier said. “The custody solution is extremely important because all the hacks so far, everything that happened until now, it was all hacks of exchanges.”

Chan said ethereum tokens, in particular, are prone to issues caused by bugs in smart contracts. Regardless of Feldmeier’s point that most breaches involve exchanges, hackers exploited such a smart contract bug in 2017 to steal $30 million worth of ethereum tokens from Parity wallet users.

A seasoned investor, Simpson referred to security practices for crypto tokens as “a moving target.” Especially in this space, the devil hides in those details.

Luckily for institutional investors, startups like BitGo and Smart Valor are prioritizing secure custody for tokens, not just bitcoin.

Chan concluded:

“There’s a lot of different events that have happened because of smart contract bugs. So, we try to be on the safer side there.”

BitGo team image via BitGo

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.