- InVault will begin operations in Hong Kong in December 2018
- They intend to follow new Hong Kong regulations that require digital asset managers to store private keys with third-party custodians
- InVault says it is already in talks with two potential insurers
Hong Kong recently launched a new set of laws regarding cryptocurrency, especially the security of cryptocurrency assets.
The new law requires that business that deal in cryptocurrency assets engage the services of a third-party custodian to secure their clients’ assets.
While this could be seen as a strict and restrictive measure by the Hong Kong government, others are embracing it.
One of such firms is InVault, a Shanghai-based start-up, which says it plans to take full advantage of the law to benefit themselves and their clients as they launch in Hong Kong.
The company just got its trust license from the Hong Kong government and intends to begin operations in December 2018.
It also has about a million ether (ETH) in its custody.
InVault intends to secure users’ private keys by keeping them in a physical vault.
“We believe that globally, custodians for cryptocurrency assets will be regulated and operated under a trust license,” said Kenneth Xu, founder, and chief executive of InVault who also said that he believes that the use of third-party custodians will become the industry standard eventually.
While Hong Kong’s new law might seem a bit restrictive, it has its heart in the right place.
The stealing of cryptocurrency, as well as hacking of wallets, is a significant problem in the industry and entire exchanges have found themselves the victims of such malicious practices.
As cryptocurrency sees more and more acceptance in the public eye and more institutional investment, the security of assets needs to be taken even more seriously.
In some cases, this is a requirement and not a suggestion.
In November 2018, the Securities and Futures Commission (SFC) created a regulation that requires asset managers that deal in digital assets to either have the assets secured by third-party custodians or self-custody.
The managers are advised to consider the insurance policy of the custodians and in the case of exchanges, insurance should cover about 95% of the assets held.
InVault says that it is in talks with two potential insurers for their clients’ assets. The biggest issue, Xu says, is for insurers to adequately determine the appropriate premium for the cryptocurrency assets.