As the number of investors buying cryptocurrencies is increasing at a rapid pace, there exists a need for a custody bank, similar to the one in equity markets. Lack of cryptocurrency custody bank discourages institutional investors in making a large commitment in the digital assets.
Japan’s Nomura is planning to fill the vacuum. It has entered into partnership with Ledger, a hardware wallet and security service provider, and Global Advisors, a Bitcoin focused investment management fund, to establish an asset custodial service, named Komainu, for digital assets.
In the recent past, there were reports of major financial institutions, such as Goldman Sachs, moving forward with their plans to establish a cryptocurrency trading desk. A Reuters survey has also pointed out that nearly 30% of the financial institutions are looking at the possibility of entering into the crypto space in 2018.
Speaking about the partnership Jez Mohideen, global chief digital officer, at Nomura said
“Global investment managers have long been held back from full participation in digital asset markets, limited by operational and regulatory risk. Our new partnership will set the required standards that will bring peace of mind to digital asset investors and provide tools and products to enable better integration with more traditional investment vehicles such as mutual funds.”
Presently, cryptocurrency exchanges are only safeguarding the cryptocurrency holdings of investors with their hot or cold wallets. However, the Coincheck hacking incident, which resulted in a loss of $533 million worth NEM (XEM), has raised alarm among cryptocurrency investors. Institutional investors will not be entering the fray in a big way without a proper custodian facility is in place.
Komainu hopes to ward off concerns of institutional investors with their custodian services.
Commenting on the venture, Jean-Marie Mognetti, co-principal of Global Advisors Holdings said
“Since its first digital asset trade in 2012, Global Advisors, the parent company of CoinShares, has been looking for a robust custody solution, the likes of which are readily available in the analogue financial system, This [partnership] will open new and exciting opportunities to global participants and contribute to move digital asset closer to mainstream offerings.”
