Crypto custodians are racing to build the next BNY Mellon or State Street. There are only a few of these custody banks and they have been around for more than a hundred years. However, cryptocurrency is such a great example of the old world meeting the new one that it gives companies a wonderful opportunity of breaking into the market that would otherwise be impossible under normal circumstances. Co-founder of Anchorage, which is a custody-platform specializing in cryptocurrency based in Silicon Valley, Diogo Monica said that building a custodian isn’t really possible in the traditional world is simply not possible and you just cannot break into this market.
She said that BNY Mellon has existed for 300 years and now crypto has provided an opportunity to establish a foundational company that could potentially last for a long time. When it comes to the long run, it is undoubtedly an inspirational view, but how will things turn out in the short run? The recent acquisitions that have been made in the crypto industry involve bundling services together, such as settlement, custody, trade execution and lending. The latest push came on Wednesday along the prime broker route as Bakkt, the Bitcoin futures platform teamed up with Galaxy Digital for combining trading and custodial capabilities.
If crypto is following the same lines as the traditional market and is starting a period of accelerated consolidation, then companies specializing in trade execution or standalone custody may have to pivot for offering additional services or they will just be swallowed up. Regulated crypto custodian BitGo believes that there will be an evolution in the same way as traditional finance. Mike Belshe, the CEO said that the space would consolidate quickly around reputable brands, similar to what happened with JP Morgan, BNY Mellon and State Street.
The recent introduction of BitGo Prime enables the customers of the platform to directly trade from cold storage across a choice of two large over-the-counter (OTC) desks and two exchanges. This saves companies from the hassle of opening and funding accounts at different exchanges and having to move assets around. But, Belshe didn’t name the venues that are connected to the trading offering. While a lot of crypto firms are now aspiring to be a one-stop-shop prime broker platform, it could simply be just about the buzzword instead of complete understanding of the services that are being provided. Prime brokerage is more about financial services than tech.
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