According to Bloomberg: Crypto custody, once seen as a niche, is becoming a hot topic for Wall Street firms eager to tap into the growing digital asset market. Unlike the straightforward task of safeguarding traditional assets like stocks and bonds, custody in the $2 trillion cryptocurrency market is far more complex due to the higher risks of theft and hacking. According to Hadley Stern, chief commercial officer at Solana custody tool Marinade, crypto custody costs up to 10 times more than traditional asset custody, making it a potentially lucrative area for both startups and established financial firms.
Coinbase Global Inc. and BitGo Inc. have so far been dominant players, but major custodial banks like BNY Mellon, State Street Corp., and Citigroup Inc. are showing increased interest, despite regulatory uncertainty. With the market growing at an estimated rate of 30% annually, according to Fireblocks Inc., traditional finance is slowly entering the space.
Projects like JPMorgan’s Onyx and State Street’s collaboration with Taurus signal Wall Street’s readiness to provide tokenized asset custody, once favourable regulations are in place. However, one key hurdle remains the SEC's SAB 121 rule, which has made it difficult for highly regulated financial firms to offer crypto custody services. While some banks have received exemptions, the industry is watching closely to see how the regulatory landscape evolves, especially as the 2024 U.S. presidential election approaches.
Despite setbacks, many financial institutions remain optimistic about crypto custody's long-term potential, betting that regulatory clarity will unlock a new wave of growth in the digital asset market.
