Coinbase Leads as Traditional Banks Hesitate Over Cryptocurrency Custody Amid Regulatory Concerns

COINOTAG news, September 15, according to Bloomberg, so far, crypto-native companies such as Coinbase Global Inc. and BitGo Inc. have been the dominant service providers, while traditional financial companies are mostly in holding mode because of concerns about regulatory uncertainty surrounding digital assets. Although the current custody market size is only around $300 million, the business is still attractive, and companies such as Fireblocks Inc. estimate that the industry’s annual growth rate is about 30%. Leading custody banks BNY Mellon, State Street Corp. and Citigroup Inc. have made initial forays into cryptocurrency custody or expressed interest. Despite setbacks, these companies are still experimenting, and many plans revolve around protecting tokenized assets. For example, JPMorgan Chase & Co. operates a project called Onyx that allows blockchain payments between bank customers. In December, the Depository Trust & Clearing Corporation acquired Securrency to provide products for tokenizing traditional financial assets. In August, State Street selected vendor Taurus for tokenization and custody of digital asset services. A major issue holding back entry for established financial institutions is a U.S. SEC rule, SAB 121, which makes it impossible for highly regulated financial firms to provide cryptocurrency custody services. President Biden vetoed an effort by Congress to overturn the bill. Several banks were exempted.