The Standard Chartered-backed digital assets custodian Zodia Custody is in talks for a fresh round of capital raise.
The institutional-grade digital asset custody solution aims to secure about $50 million to enhance its operational capacity, increase its product offerings, and widen its market reach. This funding push comes after it raised $36 million in an earlier round led by SBI Holdings in 2023, reflecting the growing demand for digital asset custody solutions.
The Chief Executive Officer, Julian Sawyer said the company is targeting investors from tokenization and payments industries. The funding campaign is being run in collaboration with the crypto-centric advisory firm Architect Partners.
Earlier this year, in June, Zodia partnered with 21Shares, one of the largest issuers of physically backed exchange-traded products (ETP) in the world. Standard Chartered is a majority shareholder in Zodia Custody, and it is also backed by Northern Trust and National Australia Bank.
Zodia is entering a growing crypto custody market
Zodia, founded in 2020 and headquartered in London, has services in about 15 jurisdictions. It already has offices in Dublin, Luxembourg, Sydney, Singapore, Hong Kong, and Tokyo. According to the ex-CEO, Maxime De Guillebon, the company plans to grow its institutional customer list.
In September 2024, Zodia partnered with Solidus Labs to reduce the rate of financial crime involving digital assets and improve risk identification and mitigation. In October 2024, it began providing custody for the Jacobi Asset Management Bitcoin ETF. In February 2023, it partnered with SBI to establish a custody service in Japan.
A report from Boston Consulting Group projects that by 2030, the crypto custody market could be valued at $16 trillion. According to its CEO’s statement, Zodia wants to take advantage of this opportunity: “We intend to partner with the best in the world to expand our institutional custody offering.”
Traditional financial institutions are also interested in the custody market. In 2022, Citigroup partnered with METACO to develop digital assets custody capabilities. Likewise, America’s oldest bank BNY Mellon, with over $43 trillion worth of assets in custody, launched a custody service for cryptocurrencies.
Crypto custody is a safety and compliance issue
The crypto space is inundated with stories of hacks and scams, which have cumulatively led to a loss of several billions of dollars. A Standard Chartered report says many crypto businesses have weak internal security controls that are ineffective at preventing serious losses.
However, custody services are different for crypto assets. Hadley Stern, the Chief Commercial Officer of the custody tool Marinade Finance, stated that it costs nearly 10 times more to provide custody services for crypto compared to traditional financial assets.
Crypto custody is a standard according to the Investment Advisers Act of 1940 (amended), which requires institutional investors to store customers’ assets with a qualified custodian. A custodian is a security service designed to help institutions, such as exchanges that hold large amounts of cryptocurrencies, protect their customers’ funds. Custodians also help facilitate trading, payments, and settlements.
As regulation and compliance grows, the need for custody services follows. Custody solutions like Coinbase Global, Gemini Custody, and Anchorage Digital are already integral to the operations of institutional investors, and Zodia’s latest funding round may be its attempt to break into the big time.