27 Juli 2020

The Block: Institutional Market Infrastructure Interview Series

Yara Ainsworth

Yara Ainsworth

Head of Marketing und Communications bei Crypto Finance AG

Über den Autor

Crypto Finance Group CEO and founder, Jan Brzezek, participated in this interview and research series from the Block. See the PDFs below for the full series or access it on the The Block here.

Author: John Dantoni | Source: The Block

The Block: Institutional Market Infrastructure Interview Series — Volume II: Custody & Security

Quick Take:

  • This is Volume II of the Interview Series of The Block Research’s Institutional Digital Asset Market Infrastructure Collection
  • The Block interviewed 13 companies that offer custody services in an effort to capture the current status of the institutional market
  • Responses in this survey relate to any new differences in client base, feedback on security methods, thoughts on fragmentation and any roadblocks with regulation, viewpoints on insurance offerings, and a discussion on prime brokerage offerings and potential consolidation

For The Block Research’s interview series on institutional custody of digital assets, we wanted to gain a better understanding of the industry’s consensus on the current market environment and their thoughts on the current landscape.

In total, we completed 13 interviews with firms in our sample set, drawn from companies that offer custody services to institutional clients. By speaking to market participants, the goal was to identify the key trends.

Many of the participants expressed similar thoughts on where they see this segment of the industry trending. However, where things diverged was in their positions on how it will get there. This became evident in how these firms are positioning themselves in the hope of catching any potential upside.

The questions provided were open-ended, and we’ve filtered out the responses from our participants for similarities and differences.

From when you first started, have you noticed any difference in your client base?

As for the types of institutional clients already with exposure to the industry, participants expressed that their clientele was predominately comprised of crypto-natives, hedge funds, and family offices.

However, some market participants expressed that their main target is banks and traditional financial institutions. Their entire strategy has been designed with this in mind, setting up the proper licensing and infrastructure.

Aside from a difference in clientele, increased interest in different services ranging from stablecoins to brokerage products was specified.

All of the participants expressed security as the main priority and the foundation of their business. Without foundational security, none of these additional services would be possible. As for the correct security implementation, whether it be MPC, Multi-signature, or HSM, opinions differed from each company.

Some expressed that this discussion is more of a marketing tactic than anything else, others claimed that it’s clear at this point that one implementation is superior, and others noted that it depends on what the client’s needs are and that these security methods all have tradeoffs.

Right now, custody seems fragmented across regions, will we see global consolidation? Also, what are the biggest roadblocks/hurdles still with regulation?

Read the full article and see the research series on The Block here (email login). Read the article as a PDF here: Institutional Market Infrastructure Interview Series — Volume II_ Custody & Security – The Block – Part 3.

Further articles in the series are available as PDFs below: 

Mapping the Institutional Digital Asset Infrastructure space – The Block – Part 1

Institutional Digital Asset Derivatives Markets – The Block – Part 2

Institutional Market Infrastructure Interview Series — Volume I_ Barriers to Entry – The Block – Part 3

The State of Institutional Custody 2020 – The Block – Part 4

Exchange Proofs of Reserves & Solvency_ a mechanical explanation – The Block – Part 5