Custodia Bank debuts segregated custody accounts service

The “property-rights-respecting” service seeks to minimize risks via segregated accounts, according to Custodia CEO Caitlin Long

article-image

Al Alex/Shutterstock modified by Blockworks

share

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.

Read more: Onramp, BitGo introduce latest iteration of crypto custody

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.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the On the Margin newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research Report Templates.png

Research

ZKPs enable efficient offchain transaction processing and validation, resulting in increased throughput and reduced fees. Solana's ZK Compression leverages ZKPs to minimize onchain storage costs, while Sui's zkLogin streamlines user onboarding by replacing complex key management with familiar OAuth credentials.

article-image

The crypto asset manager lowered its planned fee from 0.25% to 0.15%, undercutting its competitors

article-image

Plus, a look at planned ETH ETF fees and how they differ from their BTC counterparts

article-image

North Korea suspected in breach of Indian exchange’s multisig wallet

article-image

Plus, Sanctum’s CLOUD token has officially launched — but not without problems

article-image

It’s not yet clear whether Donald Trump is pumping bitcoin. But an unofficial memecoin is still seeing benefit.