What is digital asset custody and why is it in demand? Metaco explains

What is digital asset custody and why is it in demand? Metaco explains.Source: Shutterstock

What is digital asset custody and why is it in demand? METACO explains

  • At the Singapore Fintech Festival recently, Tech Wire Asia had the chance to speak with Seamus Donoghue, Chief Growth Officer at METACO, who shared about the digital asset custody industry and the skyrocketing demand for their services over the last few years.

“Not your keys, not your coins” is a popular expression in the world of cryptocurrencies – without owning your keys, you wouldn’t really be in control of your coins. Unfortunately, there is no shortage of horror stories about stolen funds, hacks and lost passwords in the digital asset industry. This is where crypto custody comes into play, and frankly the digital asset custody market is heating up like never before.

For starters, custody is a key service for professional investors to be able to access digital markets, and since total assets under custody grew rapidly in the past few years to stand at US$223 billion in January this year, according to Blockdata, demand for digital asset custody services too have skyrocketed. 

Especially for institutions, it is extremely important that their digital assets are stored in a secure and regulated way and that’s where crypto custody providers like METACO come into play. METACO is backed by Standard Chartered and Giesecke+Devrient, with clients that include Spanish bank BBVA, Singapore’s DBS Bank, and the Philippines UnionBank. 

METACO has also partnered with multi-trillion dollar custodian banks including Citibank, Société Générale and BNP Paribas to develop their digital asset capabilities. As with most digital asset custody firms, the Swiss company has expanded beyond pure custody. Its METACO Harmonize supports multiple self-custody providers, custodians and liquidity providers. 

Tech Wire Asia caught up with Seamus Donoghue at the recent Singapore FinTech Festival. The chief growth officer at METACO shared why the company is a common denominator for many institutions exploring crypto and where the industry is headed to in the near future.

So what is METACO all about really? 

Our core proposition has been blockchain, crypto, digital assets, and while it would not disrupt the financial system, it will be eventually embraced by the financial services and if they wanted to get involved in that space, the core infrastructure is not fit for purpose. So really from the start, we focused on providing the foundational cornerstone software stack for digital assets custody, in all its flavors, and all the governance that sits on top of that.

The idea is, if you’re looking at digital assets, you need more than just keeping the keys safe. Eventually, the idea is that all your assets will eventually be tokenized, because you can really transform the way you can exchange value and revolutionize the financial stack. 

Since the market for digital asset custody, payment and tokenization seems to be a very active space, what is unique about the technology provided by METACO?

I think there are many great companies in the market, with some having raised a lot of money, holding high valuations and a huge number of clients. I think most of the others in the space have focused on the proposition that crypto will disrupt the financial system, so they focused on self custody, which is great but it’s a little idealistic.

Our premise is that eventually all assets will be tokenized and you’re not going to trust yourself to manage all of your keys to your assets, so that is when trusted custodians come into play. That makes us fairly unique in the market, because we are focused on banks being relevant in this space. Banks won’t disappear, but their roles will change. They will become the gateways between the traditional world of centralized finance and the new world of decentralized finance, opening up new – and less asset-intensive – revenues in custody, trading and staking. 

So from day one, when we started in 2015, we focused on providing financial institutions secure platforms for issuing, trading, tokenizing and safeguarding digital assets. But we have also focused on the need to go further, and that is by providing orchestration capabilities. Orchestration capabilities are critical to buy optionality and to achieve the right level of security and control in a complex environment.

The reason optionality matters is because the digital assets space is changing fast. Firms need to make decisions about technology and about business models that, while sound today, may prove to be unsound in light of market movements.

So in general, METACO works a lot with banks?

Banks and large advice or even infrastructure providers.

So does that mean you are noticing a trend whereby traditional financial institutions are embracing digital assets?

I think we had some early bank clients in 2018, I would call them the pioneers — DBS and Standard Chartered Bank that were both ahead of their time and decided that this is going to be relevant, they want to have an offering. DBS launched the digital asset exchange whereby we are the core infrastructure for all the custody and the governance. As for Standard Chartered, they took their traditional custody business and spun it off to an entity called Zodia, providing digital asset custody. 

Essentially, we can conclude with the fact that if a bank doesn’t have a digital asset strategy, then it is questionable, as opposed to back then — having it makes others wonder why do they have digital asset service? After all, it is no longer about banks wanting to be the first but more about not wanting to be the last, or to be left behind.