Industry Hurdles – Custodianship
In under two years, the state of custodianship within blockchain has grown by leaps and bounds. A mere eighteen months ago publications were posting about ‘The sad state of crypto custody’. Six months after that, custody solutions were noted as a rapidly developing innovation within the industry.
A major driving factor behind the development seen, with regards to custodianship, is due to the narrative of ‘institutional capital’ entering the world of crypto. If this is to occur, they will require trusted companies to provide this service.
Today, various companies which recognized the lack of solutions in the industry have launched, and established beginning levels of adoption. The following are a few of these companies, and what they are bringing to the table.
In a recent, and promising, bit of news, payment processing giant, VISA, Blockchain Capital, and others, invested $40 million USD into a blockchain based custodial solution – Anchorage. This raise represented a Series B, with the company previously raising $16 million in their Series A mere months ago.
This young, promising, company has taken a different approach to providing a safe haven for digital assets. Rather than using passwords and usernames, the platform relies on a mix of human and artificial intelligence to verify transactions on whitelisted devices.
Anchorage has stated that, in time, their platform will support all forms of digital assets. This versatility, and interest in the sector shown by companies like VISA, points to a bright future.
One of the most anticipated digital securities exchange launches of 2019, is the upcoming Archax Exchange. With a projected launch in Q4 of 2019, it is imperative for Archax to establish all of the necessary partnerships and services sooner than later. The latest puzzle piece to fall in to place would be the decision to utilize custodial services, offered by Unbound Tech.
Unbound Tech, which operates out of New York, has developed a DLT based platform which breaks up and stores data among various parties. This is done with the intention of eliminating a single point of weakness within a storage network. No doubt, their innovative, and polished, platform led to this strategic partnership.
The rise of digital securities has also resulted in the rise of numerous issuance platforms. In order to remain appealing to their clients, each of these platforms must either offer their clients direct access to a custodial service, or redirect them to a third party.
One of the most promising issuance platforms, SWARM, has experienced better adoption than most, to date. Not offering any ‘in-house’ custodial service, SWARM established a strategic partnership with U.K. based, Copper.
Copper provides institutional grade custodianship through the use of a practice called ‘air-gapping’. This simply refers to the practice of ensuring their cold storage devices are, not only not connected to the internet, but not connected to any other device which maintains an internet connection.
Upon establishing their alliance, SWARM Cofounder Philipp Pieper, had high praise for Copper. He stated, “The integration between Copper and SWARM is a great fit due to the compatibility of our technologies as well as our teams…Copper provides the level of institutional grade security and convenience that is absolutely essential for the adoption of digital securities by institutional investors and retail market,”
Love them or hate them, Coinbase remains at the forefront of the blockchain industry. This means that when their custodial solution, ‘Coinbase Custody’ announced support for their first digital security, it represented an important step.
The reason this step is an important one can be broken down various ways, but is primarily positive, due to the increased exposure which Coinbase will afford the nascent digital securities sector. Most participants in the world of blockchain are well versed in ICOs, but have not necessarily been exposed to STOs and DSOs. Support of assets issued through these capital generation events, by an industry leader, is most definitely a step forward.
Carlos Domingo, CEO of Securitize, tweeted at the time of this announcement.
— Carlos Domingo (@carlosdomingo) June 5, 2019
TokenSoft Knox Wallet
TokenSoft has been one of the busiest companies within the digital securities sector throughout 2019. One of their various steps forward, came through their various custodial solutions for clientele. While the company has formed an alliance with Coinbase Custody, TokenSoft has developed their own solution for those interested.
‘Knox Wallet’ is the name of this offering. It is a mobile custody solution, which brings full support for various digital security protocols.
Knox provides its users with security through the use of various tactics. These include cold storage, role-based access control, and cryptographic authentications.
While Knox remains in beta, it has the potential to become a key player in the digital securities sector. It remains one of the only mobile based custody solution to support the asset class.
An entire subset of the blockchain industry was essentially birthed from nothing, in less than two years. It has since grown into a promising grouping of service providers. While time and development move slowly in the moment, reflecting on growth within blockchain shows fantastic speed of development, wherever you look.
The companies discussed here today are essentially writing the custodial solution blueprint on the fly. As these industry trailblazers demonstrate what works, and what doesn’t, we should continue to see increasingly polished solutions presented. One such example may prove to be the upcoming Facebook project, Calibra.
Square Awarded Patent for Payment Network Supporting Securities
After nearly 1 ½ years, payment processer, Square, has successfully been awarded a patent centered on establishing a ‘cryptocurrency payment network’.
Details of the Patent
The patent, which was initially filed on September 14, 2018, was done so by Square, Inc. While the patent obviously goes into great depth, describing how exactly the proposed payment network will function, the following is a short excerpt summarizing the overall goal.
“Specifically, the present technology permits a first party to pay in any currency, while permitting the second party to be paid in any currency. In this way, the technology provides benefits that remove barriers to transactions that might inhibit international commerce, or commerce with certain types of currency.”
The invention of the technology, described throughout, is attributed to three individuals.
- Christopher Michael Brock
- Brian Grassadonia
- Michael Moring
The Intriguing Part
What makes this particular patent notable for those following the digital securities sector, is the direct reference to securities. It is stated,
“The disclosed technology addresses the need in the art for a payment service capable of accepting a greater diversity of currencies including fiat currencies (US dollars, Euro, Rupee, etc.), and non-fiat currencies including virtual currencies including cryptocurrencies (bitcoin, ether, etc.), commercial paper (loans, contracts, forms, etc.), and securities (stocks, bonds, derivatives, etc.), than a traditional payment system in a transaction between a customer and a merchant, and specifically for a payment service to solve or ameliorate problems germane to transactions with such currencies.”
While details are scarce on how exactly securities will play into the mix, the potential for them to be seamlessly transferred between parties is surely intriguing.
There are a select few people that have become synonymous with Bitcoin and blockchain in general; Jack Dorsey is one of these.
Throughout the past few years, he has, not only been a vocal proponent of Bitcoin and blockchain technologies, but actually acted on his words. Through payment processing company, Square, in which Dorsey is both the Founder and CEO, the world has seen glimpses of the potential for Bitcoin as it is integrated into their services
Dorsey recently caught the attention of many as he noted that which many have – Africa holds massive potential for the adoption of, and benefitting from, blockchain. This realization has prompted a, soon to be undertaken, 6-month journey to the continent by Dorsey, as he works towards establishing blockchain based solutions to benefit the populace.
Founded in 2009, Square maintains headquarters in San Francisco, California. Above all, Square acts as a tech provider for payment processing solutions. Their rapid rise in popularity over the past decade has seen the company expand beyond U.S. borders into various countries including, but not limited to, Canada and Japan.
CEO, Jack Dorsey, currently oversees company operations.
In Other News
With a rapidly developing sector, many industry players are looking to protect their intellectual property. As such, we have found ourselves, on a variety of occasions, covering these events. The following articles touch on a few patents filed over 2019, in addition to an interesting concept involving a ‘Patent Finance Market’.
3 More Executives Leave SDX Due to Discrepencies
The blockchain-based digital asset trading venue SDX continues to have a rough start to the new year. This week, another high-level executive announced their departure from the firm. The news brings the number of executives who left the company in January 2020 up to three. The news demonstrates a realignment and shuffling of SDX’s business plan. Also, it showcases the growing pains associated with these changes
According to company documentation, all of these executives departed from their full-time positions in January. The three individuals to leave are Alex Zinder, an architecture lead at SDX, Ivo Sauter, SDX’s head of clients and products, and Sven Roth, the firm’s chief digital officer. The later of the trio agreed to stay on as an external advisor to SDX.
In a recent interview, Sauter explained the motivation behind his decision to leave. He touched on a number of critical changes made throughout the firm. These changes included a shift from the platform’s original vision. He explained that at first, the platform was to utilize the banking sector as a bridge into the rest of the market.
However, this strategy quickly changed as SDX began to tailor its platform specifically, and solely for use by banks. Sauter described how these changes effected moral and fueled the growing dis-alignment between executives and owners. He explained that originally, the platform was to be much more inclusive. For example, SDX was to enable startups to provide services around its features.
Sauter also took a moment to touch on the negative effects this corporate culture had on the project. He explained that, in his opinion, a bit more separation needed to occur between SDX and its mother company, the Swiss stock exchange operator SIX Group. Apparently, these feelings of discourse only grew as the mother company took more and more influence on SDX’s day to day operations.
Additionally, Sauter explained how the big-company approach also inhibited the company’s ability to save. Large corporations require much more reporting. In turn, this reporting raises operating costs. Additionally, smaller firms have more liberty in terms of flexibility and risk management. In the end, the corporate approach made many of the executives feel as if they had been stifled.
Despite the discrepancies, Sauter stated that he had left on good terms. He went as far as to claim that he was at a point in his career that he had no desire to have his contract renewed. Consequently, SDX chose to not offer a renewal.
Challenges in the Market
As with any major corporate reshuffle, there are going to be individuals that no longer fall in line with the platform’s overall goals. Discussing these challenges, a SIX spokesman touched on the changes and what they mean to the project. They explained that whenever you have a concept built from scratch, there are going to be many ups-and-downs associated with the development. In the end, the firm acknowledged that these changes have begun to add up with the spokesperson stating that the firm has “spent quite a few Swiss francs” on the ordeal.
SDX Moving Forward
From the tone of SDX’s past employees, the company is undergoing some heavy internal changes. As such, there is no way to determine exactly how these personnel changes will affect the overall strategy the company has chosen to follow. One thing is for sure, SDX appears to have made a priority shift towards servicing the banking sector exclusively with its new platform.
Tokeny Upgrades investorID with ONCHAINID
There is no such thing as the launch of a completed product. Times change, technology is upgraded, and needs vary. A successful product will often see various iterations and updates throughout its lifespan, in an effort to serve its intended market.
ONCHAINID is essentially version 2.0 of their previously released investorID – a solution geared towards whitelisting investors. ONCHAINID looks to oust traditional ‘central-systems’, in favour of a more decentralized approach. Along with this approach, ONCHAINID looks to build upon what investorID was able to offer, with various new functionalities.
Tokeny notes that this product is built on providing clients with 3 main features:
- Data enrichment
- Direct ownership of securities
- Customer accounts management
For those interested in learning about the initial launch of investorID, and to see how Tokeny arrived at ONCHAINID, make sure to peruse the following article.
Upon announcing ONCHAINID, Luc Falempin, CEO of Tokeny, took the time to comment, elaborating on the move and why it was needed.
Luc Falempin stated,
“For financial institutions to move away from analogue processes and step in to the digital era, they need reliable and compliant standards. Most of the protocols created for digital securities failed to recognise that identity across the value chain is essential to apply compliance for the issuance and transfer of tokenized securities. ONCHAINID, and its open ecosystem, is the most credible solution to securely and accurately identify market players and their assets on the blockchain.”
“To achieve our vision of a digital capital markets there needs to be a secure and institutional-grade system that enables the creation of digital identities for issuers, agents, investors and securities. This is why we have created ONCHAINID, to bring forth a shared and controlled data-rich ecosystem that transforms traditional finance into a truly digital and connected industry.”
Speaking with Luc
In our ongoing interview series, we have had the pleasure of hosting an exclusive discussion with Luc Falempin, CEO of Tokeny. Here, we learn more about what exactly Tokeny has to offer (including the predecessor of ONCHAINID).
Founded in 2017, Tokeny maintains headquarters in Luxembourg. Since launch, the team at Tokeny has been hard at work, developing a variety of solutions, targeted towards the digital securities sector. One such solution is, aforementioned, ONCHAINID discussed here today.
CEO, Luc Falempin, currently oversees company operations.
In Other News
Tokeny has had a successful few months. It was only recently that we were reporting on the company being included in 2019’s ‘FinTech 50’ – A comprehensive list of the top European companies within the industry.