The custody of digital assets is much more focused on cybersecurity measures than that of securities. A few questions for Gerry Afentakis from Zodia Custody.
In the public mind, cryptocurrencies are bearer instruments. Everyone is responsible for the conservation of their assets independently. But what is true for individuals is not true for institutions and the adoption of crypto currencies by institutional investors introduces the need to keep assets with third party establishments, able to meet the safeguarding requirements of entrusted assets. Based in London and registered in the United Kingdom with the Financial Conduct Authority (FCA), in Ireland with the Central Bank of Ireland (CBI) and in Luxembourg with the Commission de Surveillance du Secteur Financier (CSSF), Zodia Custody is born from an initiative incubated within Standard Chartered Bank and brought to stand on its own two feet four years ago. A few questions for Gerry Afentakis, head of development in Europe and the Middle East.
When and how was Zodia born?
Standard Chartered bank has a department that looks at the future of innovations and has realized that the custody of digital assets will be an essential part of the future of crypto currencies and, more generally, digital assets . This need for security led to Zodia’s incubation inside the bank, then its split into an independent entity four years ago. It is this authorship that provides Zodia with the necessary guarantees to ensure premium custody of digital assets, ensuring security, compliance, risk management and compliance with regulatory processes. Our service is designed to meet the needs of banks, hedge funds, and asset managers, but we have also extended it to native digital asset companies, ETP and ETF providers, and foundations. protocols or to any institutional holder of digital assets. We count DWS and Invesco among our clients.
“Our goal is to be one of the top three depositories for institutional investors in all European markets.”
How big is the company?
Zodia is registered in the United Kingdom, Ireland, Hong Kong, Luxembourg. Registration is underway in Japan, Australia and Singapore. We currently have 130 employees.
What assets do you look after?
We provide custody of all types of digital assets: cryptocurrencies and the digital version of real assets, which potentially includes digital currencies issued by central banks. Our offering includes more than a dozen crypto currencies – including obviously bitcoin, ethereum, Solana and Ripple – and a list of several dozen ERC-20 tokens. We also cooperate with Stellar and Polkadot protocols.
What processes do you observe before agreeing to deal with a crypto currency?
We must know the project, the documentation and the regulatory classification in the territories where we operate. We conduct detailed, multi-stage due diligence to assess its acceptability. This assessment covers the currency and the underlying blockchain and includes the study of financial crimes that may affect it, regulatory aspects, product governance, its technology, cyber risks, its operativity and its reputation.
The problem with crypto security lies largely in its holders, rather than in the flows which are generally well controlled. Do you operate a KYC policy?
Yes, we operate full KYC verification to prevent money laundering.
How is custody of digital assets different from custody of securities?
The main difference is that digital asset custody is much more focused on cybersecurity measures, including key management, cold storage, encryption, multi-signature wallets and regular security audits. Additionally, given that it is a new asset class, the regulatory landscape for custody of digital assets is still evolving and often differs between jurisdictions. Custody of digital assets also requires transaction tracking and blockchain analysis to trace the source of digital assets received into custody and ensure that they have been subject to a risk assessment, whether They have not been involved in suspicious activity on the channel and are in compliance with regulatory requirements.
Your company operates what you call the Custody Gateway. What is it about?
Our services are not limited to custody. We offer all sorts of other features such as buying and selling assets, borrowing them or repos. To do this, we have created a kind of App Store (in open architecture) called Zodia Gateway with the best companies for the provision of services such as staking. Zodia thus allows borrowing via Zodia Protect, or trading via Zodia Interchange which allows trading on a centralized exchange without the assets leaving their deposit, thus avoiding counterparty or leakage risks. Note that we use the services of external ethical hackers to verify the strength of our protections.
What developments are you targeting in Europe?
Our goal is to be one of the top three depositories for institutional investors in all European markets. We believe that only suppliers with strong guarantees will survive.
Your next step?
We are currently assessing the largest crypto markets where we are not present as a regulated entity, including Switzerland, and designing a go-to-market strategy for each.
