BitGo, Gemini, Coinbase among others move to give cryptocurrency custody solution. This is to address the safety of cryptocurrency storage that is one of the factors hindering the institutional adoption of virtual currencies.
Cryptocurrency Hack Issues
One of the menaces affecting the cryptocurrency community is the issue of hacking. Hacking activities range from cryptocurrency wallets, systems, and exchanges. Despite the level of security cryptocurrency exchanges implement against unauthorized access on their platforms, cyber hackers are still able to navigate their way in getting hold of wallets private keys which give them access to people’s investments on the blockchain.
A ‘total solution’ for safeguarding cryptocurrencies will be one of the best innovation to hit the cryptocurrency community at the moment.
Cryptocurrency startups are already devising a solution to the menace, and it seems to be very imminent. Notably, the system of operation in the conventional financial institute is having money stored in highly guarded and secured environments or having FDIC insure against losses, while the appropriate place to store cryptocurrency assets of ‘top investors’ remains a significant challenge.
As cryptocurrency startups are willing to find a solution to it, the institutional investors are also willing to solve the menace of crypto storage. Thus far there has been no tangible success as noted by Monica Summerville, Senior Analyst at TABB Group who specializes in financial technology, except through self-custody and private key management.
Summerville noted that what’s considered safe at the moment includes storing clients cryptocurrency on tiny USB devices against the hack. Other options are storage on cryptocurrency exchanges or personally managing private keys offline which is referred to as cold storage.
Nevertheless, the Securities and Exchange Commission (SEC) requires that private funds be put in third-party regulated financial institutions for cryptocurrency assets that are valued over $150 million.
With cryptocurrencies, the distance between hacker and cryptocurrency assets is the “private keys” or alphanumeric codes used to access funds on the blockchain. The firm managing the key is known as custodian. Therefore, filling up this gap is a necessity for the cryptocurrency space.
Firms Effort To Resolve Cryptocurrency Custody Issue
Bitgo, a cryptocurrency company, is in the race of providing a permanent solution to the custody issue. On Thursday the firm received a state trust company charter from the South Dakota Division of Banking. This makes it the only regulated custody offering solution to cryptocurrency asset holders.
Mike Belshe, BitGo co-founder and CEO stated:
“This is the missing piece for infrastructure — it’s a treacherous environment today. Hedge funds need it; family offices need it, they can’t participate in digital currency until they have a place to store it that’s regulated.”
Coinbase, Gemini, Japanese bank Nomura, Goldman Sachs, and Northern Trust are looking into bringing a permanent solution into cryptocurrency safety issues.
Sanford C. Bernstein opined that an appropriate cryptocurrency custodianship would be a driving factor for the involvement of institutional fund because of its security. Maybe this will finally aid the long-awaited bullish trend the cryptocurrency community seeks.