Custodians occupy one of the clumsiest corners of Wall Street. The largest – State Street, Northern Trust, and Bank of New York Mellon – make money on fees charged for back office services like record keeping and trade clearing. Your entry into the wild world of cryptocurrencies looks inappropriate.
But the move is a rational response to the demand. Institutional interest in cryptos has risen sharply over the past 18 months as low interest rates fuel continued demand for alternative assets. Despite a recent pullback, Bitcoin prices are still up more than 250 percent in the past 12 months.
Being boring is a selling point. Compared to their private counterparts, institutional investors are more likely to turn to big names and regulated companies for support services in cryptocurrencies – especially in the face of it the lack of clarity in the US on regulating the $ 1.5 trillion market.
In December, Northern Trust partnered with a division of Standard Chartered to create a crypto-custody business called. to start star sign. Two months later, BNY Mellon announced plans to launch it a new digital custodian this year. State Street announced in April that it was teaming up with startup Pure Digital to create an institutional Trading platform for digital currencies.
The fees generated from digital assets will not overtake the fees charged from traditional assets anytime soon. Coinbase, the Bitcoin exchange that went public this year, is with $ 223 billion in assets under custody. It made it easy $ 10.4 million from custody fees last year, compared to $ 1.1 billion in trading revenue. Competition increases the pressure. Fidelity Investments, the fund management giant, is another big participant in crypto custody.
For custodians, whose services are typically less profitable than advising on deals or listing a company, the value of servicing digital assets may come from using blockchain technology to optimize future financial transactions. The potential for big savings adds a bit of glamor to an otherwise nondescript industry.
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