Onchain Custodian
Alexandre Kech of Onchain Custodian discusses the current trends in the crypto space and how the perception of crypto is altering
How is the digital asset space expanding and are you seeing a growing interest from institutional investors?
Currently, the digital assets space is very much crypto-based and most of the institutions are coming from the crypto industry: crypto exchanges, funds which are generally managed by asset managers who have moved from traditional capital market to the crypto space. You also have family offices and high-net worth individuals. You do have interest expressed from the more conventional asset managers who must still conform to compliance rules built for traditional finance.
Some are told not to touch crypto, as it is seen by some as too dangerous, but that perception is changing. Traditional foreign exchange providers are also now beginning to provide crypto services to customers, so infrastructures and services providers are entering this space to facilitate the angle of more traditional institutional players–many have changed from only servicing fiat to fiat and crypto.
And what trends are you seeing in the digital asset sector?
It all started with bitcoin 10 years ago and it has significantly expanded. Utility tokens came next which were the product of Initial Token Offerings; then stable coins, which are mostly used in the crypto space as a way to hedge the volatility risk.
We are also seeing more and more discussion around security tokens, more in the space of private investment such as private equity tokenisation. The use cases we’re seeing are around real estate investment in a tokenised form; fine art and fine wine also in a tokenised form–trying to leverage the benefit of tokenisation and increase the value in those types of investments.
Tokenisation and digitisation make these assets more liquid. When an institutional invest in real estate, for example, it’s very difficult to exit that investment or, if so, through an expensive pay back to the issuer.
The idea of tokenisation is to allow that to happen on a secondary market such as a digital token exchange.
What is Onchain Custodian currently working on in this space?
We are a custodian, so one of the major challenges of managing tokens is securing private keys given access to these cryptocurrencies and private tokens.
Many exchanges are hacked on a regular basis, crypto practices are at risk of losing millions sometimes.
So what a custodian is there for is to focus on security and custody and build the right technological and operational environment to ensure that the assets of the customers are safe—they won’t be hacked, or won’t be lost—meaning their investors can sleep at night.
We also give single window access to tokens on multiple blockchains. So we take care of the integration and the security around blockchains as well as the protocols they use. This is so our customers can focus on their investment strategy, or their projects, for example when they’re a start up.
We take care of the management of tokens and we also provide–via partners—access to value-added services, like lending and staking platforms. We have a network of players that they can trust.
Digital assets can present challenges to custodians, what are these challenges? Are you seeing the number of specialised custody services increase?
Yes, definitely, third-party custody is a new trend. Customers want an independent custodian who can hold assets safely, it’s all about security and transparency.
Our job is to create an environment that will not be hackable and can be trusted.
Technology evolves with time, security will improve as technology gets better and better.
We’re constantly working with different providers to see how their solution can help us strengthen our cybersecurity, as well as working with competitors through the Global Digital Finance (GDF) to build codes of conduct for the industry.
We need to ensure that we are all working toward the same objective–safekeeping the assets of our customers.
What opportunities and additional capabilities have the recent onboarding of including Ontology Foundation, Tembusu Partners and Timestamp Capital brought ONC?
These are firms that operate a blockchain, or they are venture capitals that have invested in companies through tokenisation. It’s all about the same thing, it’s all about security.
One of the services we provide them with, when they have long holdings they don’t actively manage, is access to partners to lend part of their holdings out and earn interest.
We are in partnership with firms who actively manage assets through arbitrage, we are also working with market makers who are often in demand of liquidity for their operations. It’s another lending capability that we can offer our customers–to not stand still with their holdings and earn interest.
How do you see the digital asset space expanding in the next five years?
I see more involvement of traditional players. In the custody space, we will probably collaborate with some of the well-known names, the ones I’ve previously worked with when at SWIFT, actually.
I want to understand more about where custodians stand with crypto as well as tokenised assets.
I want to see whether they have an appetite to build in-house or maybe use Onchain Custodian as a sub-custodian. We can help from a know-how and technological point of view, to manage those assets they do not know about.
We’re already talking to private banks who have that appetite because they typically serve family offices and HNWI who want to know more about crypto. Sometimes they don’t have anyone internally who knows how to go about it.
They start talking to technology providers and service providers like us to help them serve their customers while not being exposed to the operational and technological complexity of it all.
I think the up-take will take some time. More appetite will come with security tokens because it is a regulated space. Crypto is not always regulated everywhere. But with security tokens, I think we could see some synergies in the near future between players like us and more traditional ones.
