Investment Operations

DIGITAL ASSET SERVICING PREFERENCES BECOMING CLEARER

Digital Asset Custody and Servicing

While there is still some divergence about the best ways to store and protect digital assets, today’s investors are seeking out institutional-grade infrastructure to support their investments in crypto.   

Investors seeking safe and reliable infrastructure for their growing participation in digital assets are confronted with an occasionally bewildering array of choices across digital wallets, crypto custodians, settlement networks, and support for fiat currency and digital asset securities. Moreover, many institutions do not fully understand the regulatory landscape governing digital asset infrastructure, including custody. 

“Greater clarity on custody could go a long way to open the floodgates of institutional flows into digital assets,” says David Easthope, Senior Analyst for Coalition Greenwich Market Structure & Technology and author of Providing Digital Asset Services:  An Institutional Infrastructure Roadmap.

To help clear up that uncertainty Coalition Greenwich, in partnership with Etana Custody, recently completed a research study of 86 capital markets professionals engaged with digital assets to understand their technology infrastructure preferences and choices. The study included a mix of asset managers, crypto hedge funds/VCs, family offices, and pension funds/endowments, as well as banks, brokers, exchanges, and market infrastructure firms, mainly from North America and EMEA. 

The increasing diversity of digital assets held by institutions is driving about half of these firms to employ a combination of custody approaches including self-custody and third-party custody. Furthermore, among these institutions there is a very strong preference for regulated custody, with almost two-thirds of institutions saying it is very important for a custody provider to be fully regulated. And yet, many of the buy-side firms participating in the study also report they do not fully understand rules defining what it means for a custodian to be a qualified custodian (QC) for digital assets. 

“Bringing more institutions into digital assets will require the continued build-out of a robust technological and operational infrastructure to support trading and investing. Moreover, regulatory clarity along with education by custodians about custody options will help firms better integrate digital assets into their investment frameworks,” says Easthope.