Coinbase Ramps Up $10 Billion Bet on Bitcoin and Crypto, As Ledger, IBM and Fidelity Court Institutional Investors
The crypto custody race is on. In the wake of the QuadrigaCX debacle, the disgraced Canadian cryptocurrency exchange that has lost over $145 million in customers’ digital assets, in addition to other reports chronicling hacked exchanges and vanishing Bitcoin, the biggest names in the cryptosphere are stepping up to offer world-class custody solutions.
Tackling the industry’s Achilles heel of keeping clients’ funds safe, Coinbase, Ledger and IBM are offering new services, with Coinbase and Ledger using the latest robust tech to lock up customers’ crypto assets in cold storage, completely disconnected from the internet. IBM’s solutions, however, involve securing crypto assets via the cloud.
Coinbase, the largest crypto exchange in the US, is introducing a new staking offering through its Coinbase Custody platform. The program will allow its institutional investors to earn interest on certain crypto holdings. The move is part of the company’s big bet on institutional investors and its plan to bring an estimated $10 billion of Wall Street money sitting on the sidelines into the market. Coinbase will keep staked assets in cold storage and offer insurance protection.
The first supported cryptocurrency on the new service will be Tezos (XTZ).
Says Sam McInvale, head of product at Coinbase Custody,
“Staking avoids deflation, but products to date increased risk. Prior to today, the risk necessary to actively participate in staking has mostly outweighed the return. As a result, many institutional investors have elected to sit on the sidelines.
Coinbase Custody changes this calculus. No other staking provider has our track record of security and regulatory compliance, nor our comprehensive, best-in-class insurance coverage.”
Coinbase Custody will run its own nodes and validators for Tezos and every future chain it supports, including Maker, which will be the second supported cryptocurrency integrated into the new custody program.
The company projects an annual interest rate of 6.6% for staked assets.
On Thursday, Paris-based fintech company Ledger, a leader in hardware wallet devices, announced a new partnership with Hong Kong-licensed Legacy Trust Company to introduce an institutional grade digital asset custody solution dubbed Ledger Vault.
The Ledger Vault team, operating out of New York, aims to attract big institutional money, expanding Ledger’s retail-focused business and capitalizing on the success of its consumer hardware wallets such as the Nano S.
The new platform is a multi-authorization wallet management tool for digital assets. Legacy Trust, which provides Bitcoin custody services for exchanges, OTC desks and hedge funds, will be able to integrate Ledger’s hardware technology to beef up security. The company will also be able to introduce custody for ERC20 tokens.
According to the announcement, Ledger Vault “has been specially engineered with the needs of enterprise and institutional clients in mind.”
Tech giant IBM has reportedly generated a wait list for its latest initiative: a crypto custody tool that allows other companies to store and secure cryptocurrencies. According to CoinDesk, IBM says it’s working with several banks to test a self-custody solution that’s being built in collaboration with New York investment firm Shuttle Holdings.
The platform is a hybrid cloud-native application that secures digital assets by using IBM Hyper Protect Services. Unlike cold storage, IBM Cloud utilizes the internet. Its custody toolkit involves the creation of a hardware security module (HSM) that will allow users to access their cryptocurrencies remotely. It aims to be just as secure as cold storage while offering a variety of convenient features for quick and secure access to a user’s crypto assets.
IBM’s chief technology officer Nataraj Nagaratnam and Shuttle Holdings chief investment officer Brad Chun introduced the crypto cloud custody solution at IBM Think 2019.
Other Major Players
Fidelity, Gemini, Baakt, BitGo, Kingdom Trust and several other industry leaders are launching or have launched custody services. Crypto staking companies Celsius Network and BlockFi are also offering cold storage services to protect customer assets while paying out interest.