With the recent market volatility in crypto, there is no doubt that many institutions are rethinking their approach to digital asset custody. If you have been in the financial industry long enough, the headlines of the last few weeks surrounding the crypto industry may be giving you flashbacks to the financial failures of Long-Term Capital Management, Lehman Brothers, and MF Global among others.
In the wake of these crises, many learned hard lessons for failing to diversify their custody infrastructure or by not asking the appropriate questions about the ownership, control, and risk management surrounding third party custody of their assets. Regulation advanced. Industry standard thinking and practice evolved. Firms that chose to reduce risk and drive efficiency won.
In that same time frame, digital assets went from being an impossibility to a burgeoning asset class with its own growing pains. Whereas those in traditional finance were driving toward diversifying the custody of their assets across multiple vendors and implementing stronger controls, the crypto community - empowered by Satoshi Nakamoto’s invention - adopted an ethos of self-reliance epitomized in a common refrain you may recognize: “not your keys, not your crypto.”
While the self-custody implied by this way of thinking is an option for many, institutions have different needs and requirements. In the majority of institutional use cases, a third party qualified custodian is not just a smart idea, it is a necessity.
At Protego Trust Bank, we are focused on being the lowest risk provider of digital asset custody to institutional clients. Crypto is resilient and has shaken off similar crises in the past. I believe it will again, but there are additional risks and crises ahead, just as there are in any financial system. Be they failures from inappropriate use of leverage, asset-liability mismatches, or counterparty defaults, each must be analyzed through the lens of risk. Protego Trust Bank’s approach is to offer qualified custody of digital assets where client assets are segregated, fully reserved, held in the client’s name, and secured by best-in-class technology.
By adopting these strategic principles, we have designed Protego Trust Bank to serve as a much needed facilitator for stable, safe, and secure financial markets in digital assets on behalf of our clients. If you or your firm are rethinking your strategy around digital asset custody, I would love to chat to understand your needs. Please connect with me directly or drop Protego a line via https://www.protegotrust.com/contact-us.