Future of Finance


Digital Asset Custody: The Future looks like the past

A Future of Finance webinar 6th September at 2pm UK time

What is the event about?

Institutional investors have toyed with the cryptocurrency markets for years. Where they are actually committed is to the wider digital asset markets, including both asset-backed and digitally native security tokens and digital forms of currency such as tokenised deposits, Stablecoins and central bank digital currencies (CBDCs). 

This is creating a demand for institutional-grade digital asset custody services, complete with regulated status, insurance cover and cyber-security assurances. This webinar will explore the emerging geography of digital asset custody, with a particular focus on asset safety, regulatory compliance, the range of services available, interoperability between the various blockchain-based networks and traditional markets and likely future developments.

It follows the launch in July 2023 of the first of a planned series of Future of Finance guides to digital asset custody for institutional investors (which can be found at Digital Asset Custody Guide), and will be based in part on its research findings and the issues they raise.  Its basic thesis, as its title suggests, is that digital asset custody will come increasingly to resemble traditional securities custody as the digital asset markets grow.

That growth is likely to be driven by the tokenisation of issues that would previously have tapped the conventional capital markets, the migration of existing securities and funds to tokenised markets, and the tokenisation of real and alternative assets not previously available in liquid forms. Without the engagement of “real money” institutional investors that growth will be impossible – so the availability of digital asset custody services which institutional investors can reply upon is crucial.

Institutional investors want and expect their custodians to insulate them from the operational and safety risks created by investment, and digital assets are no exception. The initial issue of the Future of Finance guide to digital asset custody explores what this means in practice: the asset safety technologies employed, the policies and procedures adopted, the certifications sought, the insurance cover provided and the audits conducted. The webinar will explore these issues with an expert panel.

Why attend?

If you are a digital asset custodian, a traditional custody bank, a sub-custodian, a regulator, an investor, a central securities depository (CSD) or a traditional or digital exchange, or an asset manager or asset owners either active in digital asset markets are planning to become so, you need to join this discussion. Join by clicking on the REGISTER HERE link above.

What topics were discussed?

  1. Institutional investors will want to move seamlessly between cryptocurrencies, native tokens asset-backed tokens, traditional securities and Stablecoins, tokenised deposits and CBDCs, i.e., between digital and non-digital assets. What does that imply for custodial services?
  2. What sort of custodian are institutional investors and asset managers empowered under law and regulation (e.g., ERISA Section 404(b), 1940 Investment Company Act Sections 17(f)5 and 17(f)7)) to appoint?
  3. The leading global custodians could largely ignore the cryptocurrency markets but tokenisation could transform their core business. How are they positioning themselves to remain relevant as the capital markets transition to a tokenised future?
  4. How are the major central securities depositories (CSDs) positioning themselves to remain relevant as the capital markets transition to a tokenised future?
  5. Can the leading cryptocurrency custodians (notably the exchanges offering a custody service) survive the institutionalisation of digital asset custody – are they adapting fast enough to the needs and compliance obligations of regulated institutional investors?
  6. What factors are driving merger and acquisition activity in the digital asset custody market – and will it continue?
  7. What characterises the digital asset custodians that have failed or withdrawn from the market?
  8. Why is an already over-crowded market continuing to attract new entrants (e.g., the traditional exchanges)?
  9. How can non-bank custodians survive?
  10. What degree of assurance do third party certifications (e.g., International Standard on Assurance Engagements (ISAE) and System and Organisation Controls (SOCs))  provide to institutional investors?
  11. Is insurance cover an adequate substitute for a large balance sheet?
  12. What role will providers of cryptocurrency custody technology play in the future (e.g., selling technology to service providers, providing self-custody services etc.)?
  13. What impact has the failure of a number of banks servicing the cryptocurrency and Stablecoin markets had on the attitudes of traditional custodian banks and their institutional customers towards custody of cash?
  14. What part are regulators playing in the evolution of the digital asset custody landscape – and especially the Securities and Exchange Commission (SEC) with SAB 121 and its proposed changes to the Investment Advisors Act?
  15. Why did the SEC think it made sense to insist digital asset custodians put client assets on the balance sheet and indemnify clients against loss?
  16. How do traditional custodial practices (such as separation of duties and segregation) compare with practices in cryptocurrency custody?
  17. Are traditional custodian banks mastering the novelties of digital asset safekeeping and servicing (e.g., “atomic” settlement, “air drops,” staking, collateralised lending, “prime brokerage”)?
  18. After HSM, Multisig and MCP, what will be the next major technical development in the safekeeping of the private keys to digital assets?
  19. Both the cryptocurrency and tokenised assets markets are trivial in size by comparison with conventional debt, equity and fund markets. What is the business case for a major global custodian to invest in a digital asset custody service?
  20. How will the digital asset custodian of the future be paid?

The panel

Alexandre Kech, Head of Digital Securities Executive Board Member at SDX https://www.linkedin.com/in/alexandrekech/

Sean Mullins, Senior Vice President – Digital Assets and Financial Markets at Northern Trust https://www.linkedin.com/in/seanmullinsinnovation/

Mark Mayerfeld, CRO at GK8 https://www.linkedin.com/in/mark-mayerfeld-0566874/

Kelesi Blundell, Partner in the advisory Financial Services Regulatory practice at Herbert Smith Freehills https://www.linkedin.com/in/kelesi-blundell-04bb346b/

Moderator: Dominic Hobson Co-Founder at Future of Finance https://www.linkedin.com/in/dominic-hobson-49b8222/

For Further Information Contact Wendy Gallagher on wendy.gallagher@futureoffinance.biz