The bank offers separate accounts, which it claims offer better customer protection than standard omnibus accounts.
Wyoming-based Custodia Bank has announced the launch of a Bitcoin Custodial platform for fiduciaries, investment advisors, fund managers and corporate treasurers. The platform was approved by the Wyoming Division of Banking and is available in some US states.
1/ Big news!! of custodia #bitcoin The custody platform recently went live. Custodia is a *bank* built by Bitcoiners and we offer differentiated (not omnichannel) custody accounts on our custom-built Bitcoin custody platform. Our whitepaper explains how we are different: https://t.co/O6lgaWdSxK
– Custodia Bank™ (@custodiabank) 7 November 2023
The bank offers separate accounts which, it claims, provide better customer protection than the standard omnibus accounts common in the digital asset custody industry. According to white paper,The omnibus model carries a lot of risk in terms of the storage, transfer and possible repossession of customer digital assets. Additionally, omnibus accounts face the risk of collateral in the event of bankruptcy.
On the other hand, segregated accounts, described by the bank’s CEO Caitlin Long as an “asset-rights-respecting Bitcoin custody service,” are said to “reduce those risks and improve transparency and auditability.” The whitepaper explains how the segregated account model for Bitcoin custody, also known as the UTXO (Unspent Transaction Output) custody model, works.
“In the segregated account model for Bitcoin custody, a customer entrusts digital asset storage to a custodian who stores the digital assets on-chain. The assets are not transferred and cannot be mortgaged or re-mortgaged to any other party for any reason. nor is the property transferred internally by the custodian, who […] “Mitigates the significant risks inherent in digital asset custody that have recently contributed to the loss of client funds by other digital asset custodians,” the bank shared.
With this model, the custodian can focus exclusively on protecting the private keys associated with the client’s deposit address.
Following the collapse of crypto businesses like FTX last year, companies in the digital asset custody industry are trying to improve custody to make the industry more attractive to potential institutional clients. Data from January 1st survey Bitwise and VettaFi show that about 38% of 400 respondents pointed to custody concerns as a barrier to their investments in cryptocurrency.
Earlier this year, the US Securities and Exchange Commission (SEC) Proposed A rule that would mandate that investment advisers “entrust the safekeeping of clients’ assets to qualified custodians.” This was done to ensure that customers’ assets were properly separated and held in accounts to protect them in the event of insolvency or bankruptcy.
Meanwhile, Custodia Bank is welcoming user feedback on the platform, which was developed in-house.
Mercy Mutanya is a tech enthusiast, digital marketer, author and IT Business Management student. She enjoys reading, writing, doing crossword puzzles, and watching her favorite TV series.
More Read
Bitcoin Crypto Related Post
