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BlockTower Asset Management - Institutional Digital Asset Custody

posted by BlockTower Capital Partners LP
1mo ago 289

In the United States, the history of custodian banks dates back hundreds of years. The Bank of New York Mellon, which today holds more than $30 trillion in assets under custody (AUC), counted Benjamin Franklin, Alexander Hamilton, and Thomas Jefferson among its founding

shareholders in 1781.


Today, custodians like BNY Mellon and State Street (which also holds $30+ trillion in AUC) perform essential functions for institutional investors: they safeguard assets like stocks and bonds, collect stock dividends and bond coupon payments for the assets they hold, enable

shareholder voting, and may help with accounting, compliance, and taxes, among other services.


As forward-looking institutions increasingly incorporate digital assets into their portfolios, demand for third party digital asset custody has grown. For some, it is a question of protecting client assets with the most

sophisticated technology available. For others, it may be a legal requirement: with limited exceptions, federal law requires registered investment advisers to hold client assets with a “qualified custodian.”


To meet this institutional need, a variety of providers have entered the crypto custody arena over the last two years. These entrants include both crypto-native custodians and traditional financial service providers, reflecting the fact that digital asset custody sits at the intersection of

blockchain, finance, and enterprise security—and is a much more technically advanced endeavor than storing traditional equities.


BlockTower has been exploring and mapping this new market landscape to understand the different approaches these varied providers are taking. Together with Anchorage, the leader in secure digital asset custody, we have developed the following overview of custodians’

features and capabilities to aid institutional investors as

they navigate this emerging vendor category.