Custodia Bank debuts segregated custody accounts service

Custodia Bank is now offering to hold bitcoin for businesses, as the crypto-friendly company looks to tout a different custody model than some competitors.

Custodia’s Bitcoin custody platform, designed for fiduciaries, investment advisers, fund managers and corporate treasurers, is now operational in select US states, the company said in a Tuesday X post.

Certain bitcoin custody models have become “infamous,” Custodia CEO Caitlin Long said in the company’s bitcoin custody white paper — noting the failures of Mt. Gox, FTX and Prime Trust.

Custodia looks to offer a “property-rights-respecting bitcoin custody service” by using segregated accounts, Long added, which don’t commingle customers’ crypto.

“The omnibus model brings significant risks associated with storage, transfer and potential rehypothecation of customer digital assets, and omnibus accounts can be at risk of bail-ins in the event of a bankruptcy,” the white paper states. “In contrast, segregated accounts minimize those risks and improve transparency and auditability.”

Custodia’s new platform was approved by the Wyoming Division of Banking, the company said in the X post. Through the bank’s custody model, a customer delegates crypto storage to a custodian that stores the assets on-chain.

“The custodian focuses its energy and attention exclusively on safeguarding the private keys that correspond to the customer’s deposit addresses,” the white paper adds. “Assets are not moved and cannot be pledged or rehypothecated to another party for any reason. Nor are the assets moved internally by the custodian.”

Companies have looked to improve crypto custody in an effort to appeal to institutions that may be looking to enter the space, particularly after events like the collapse of FTX last year.

About 38% of respondents of a January survey by Bitwise and VettaFi cited custody concerns as a barrier to investing in crypto.

Such efforts also come after the US Securities and Exchange Commission proposed in February to require the “safekeeping of client assets” to what they call “qualified custodians.”

Bitcoin asset management platform Onramp partnered with BitGo last month to launch a multi-institution custody product that divides key-holding responsibilities to three institutions.

That approach to custody came a few months after Standard Custody & Trust Company in July sought to blend the security of qualified custody with the control of self-custody as part of a July partnership with L1 Advisors.

Deutsche Bank signaled in September it was set to build digital asset custody and tokenization services by teaming up with crypto infrastructure specialist Taurus.

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