In a significant development in the world of cryptocurrency custody services, Zodia Custody, an FCA-registered digital asset custodian backed by Standard Chartered, has announced a strategic partnership with Metaco, a crypto custody firm acquired by Ripple. This collaboration aims to provide global sub-custody solutions, addressing the growing demand for self-custody of digital assets.
The rise of self-custody amidst challenges in the crypto economy
As the cryptocurrency market faces economic challenges and inherent threats, the concept of crypto storage and settlement networks has gained popularity as a means to reduce third-party interference. Recent events, such as the FTX fall and the subsequent crypto winter, have made investors more vigilant about the potential risks associated with cryptocurrencies.
Julian Sawyer, CEO of Zodia Custody, highlighted the significance of the partnership with Metaco. He described the sub-custody system as “the third generation of crypto custody,” where multiple custodians are interconnected. This system allows clients from various regions to securely store assets in different locations, leveraging the regulatory permissions of sub-custodians like Zodia Custody.
Sawyer explained, “For example, a client in Brazil, who is a custodian, may want to store some assets in the UK, and they’re not currently in the UK. So they could use us as their sub-custodian and use our regulatory permissions, etc. I think the multiple networks that are out there are really key in terms of linking custodians together, and linking custodians to exchanges and venues in a compliant manner.”
The evolution of crypto custody systems
Zodia Custody’s partnership with Metaco represents a notable advancement in the crypto custody space, but it is not the only system designed to enhance the security of cryptocurrencies. Julian Sawyer mentioned other systems, including the Copper Loom System and self-custody off-exchange systems, that have been introduced to promote the utmost security for digital assets.
In related news, HSBC Holdings, a global banking giant, has also entered the fray by collaborating with Metaco to offer custody services for tokenized securities and similar assets. The bank plans to launch these custody services in 2024, complementing its existing crypto platform, HSBC Orion.
The move toward tokenized securities
HSBC’s partnership with Metaco reflects the broader trend of traditional financial institutions embracing blockchain technology and digital assets. The tokenization of securities, wherein traditional assets are represented as digital tokens on a blockchain, offers enhanced liquidity and efficiency in the financial markets.
With HSBC’s entry into the custody services for tokenized securities, clients can expect a more secure and regulated environment for managing their digital assets. This move further demonstrates the growing acceptance of blockchain and crypto-related services within the traditional banking sector.
Global expansion of custody solutions
The collaboration between Zodia Custody and Metaco, along with HSBC’s partnership with Metaco, underscores the increasing need for global custody solutions in the cryptocurrency space. As the crypto market continues to evolve and mature, institutional and retail investors alike seek reliable and compliant custodial services to safeguard their digital assets.
The future of crypto custody appears promising, with innovative solutions like sub-custody systems and tokenized securities gaining traction. These developments aim to bridge the gap between traditional finance and the crypto economy while maintaining the highest standards of security and regulatory compliance.