Cryptocurrency analysts are increasingly arguing that the lack of custody services provided by leading players from within the finance industry pose a significant barrier to institutional investors seeking exposure to the cryptocurrency markets.
Also Read: Policy Easing, New Crypto Classification in South Korea
Lack of Crypto Custody Services Comprises Serious Issue for Institutional Investors
A number of finance professionals have argued that a lack of cryptocurrency services being offered by institutional custodians poses a significant barrier to widespread institutional investment in the virtual currency sector.
Blake Estes of Alston & Bird LLP stated “For chief investment officers, there’s only downside risk in cryptocurrency,” adding that it “would take a leap of faith with a new custodian with no brand recognition. That presents a real risk for them,” during a recent interview with Pensions & Investments.
Mr. Estes of Alston & Bird shares this opinion, stating that “So much of the security of bitcoin and other cryptocurrency rests with who stores that private key, who controls the vault. Blockchain (the technology behind the transfer of assets) itself can’t be hacked, but it all still boils down to who ends up holding the keys. I’d tend to think that pension funds will not venture into uncharted territory until they’re certain about the security of who has custody of the keys.”
Analysts Argue Cryptocurrency Sector is Not Yet Developed Enough for Institutional Custodians
Mark Kinoshita, senior vice president of Callan LLC, believes that the virtual currency industry is still a long way from witnessing institutional custodians offering services to cryptocurrency investors.
“I don’t know that (custodians) are focused on cryptocurrency; I think they’re more focused on blockchain and distributed ledger technology and their use in operations. They’re joining consortiums that are looking at
