Hong Kong Firm to Launch Crypto Custody Services to Meet Institutional Investor Demand

Omar Faridi
  • Hong Kong and Singapore-licensed Fusang Investment Office will soon offer crypto custodial services.
  • Fusang Investment CEO Henry Chong stated that “the way we keep digital assets secure is of paramount importance.”

Fusang Investment Office, an asset management firm serving private Asian family businesses, will reportedly launch cryptocurrency custodial services for in Hong Kong. The service will be called Fusang Vault, and it’s expected to be introduced in Q4 2018.

Fusang Investment CEO Henry Chong stated that partnering with an independent third party specializing in the crypto sector was required in order to offer the crypto-custody services, as it will need to hold and periodically audit clients’ digital assets.

The University of Oxford graduate noted that his company was planning on providing insurance services for its customers’ crypto assets. Speaking to the South China Morning Post, Chong said:

Digital assets are akin to bearer bonds, whereby whoever that is holding the security is presumed to be the owner and there is no registration of ownership information of the security. Hence, the way we keep digital asset secured is of paramount importance.

Henry Chong

Meanwhile, Jolyon Ellwood-Russell, partner at law firm Simmons & Simmons, said that crypto-custody services were not yet regulated. This means that if a user’s crypto funds are lost or stolen, then they will have to rely on only the terms and conditions of their custodian services contract.

He also stated that there were several issues not addressed in the custodial services contract:

For example, in what capacity are the custodians holding the assets? Are they holding them as a bailment, that is, a trust, so the assets are outside the estate of the custodian on an insolvency. Just having segregated accounts does not automatically mean that on an insolvency the investors assets will be protected or recoverable from a receiver or liquidator.”

Jolyon Ellwood-Russell

Institutional Investor Demand

Despite Jolyon’s skepticism regarding custodial services for digital assets, several crypto companies already offer them. Notably, institutional investors have been “waiting on the sidelines” when it comes to cryptos, partly because of a lack of custodial services.

San Francisco-based cryptocurrency exchange Coinbase recently launched custodial services for cryptocurrencies in an attempt to tackle the problem. The company revealed their new service helps safeguard their clients’ assets by requiring multiple signers for all transactions.

The exchange’s crypto custody services also help customers keep their digital funds safe by setting withdrawal limits and providing audit trails. As recently covered, billionaire investor Mike Novogratz believes a “herd of institutional investors” is starting to move into crypto.

Malta, the ‘Blockchain Island’ Dominates Crypto Markets’ Trading Volume

Malta, a small nation that became known as the ‘blockchain island’ for its friendly approach to cryptocurrency-related businesses, has seemingly been dominating the cryptocurrency markets when it comes to trading volume.

The country, which was the first to establish a full regulatory framework for distributed ledger technology (DLT),  saw leading cryptocurrency exchange Binance move there after facing regulatory problems in Asia last year.

The exchange seemingly started a trend, as since then various large cryptocurrency trading platforms have followed its footsteps and moved to the cryptocurrency-friendly nation. Exchanges that are now registered in Malta include OKex, BitBay, Alpahex, and Nebula.

The influence these exchanges have is notable in the market, and has helped Malta stand out. According to CryptoCompare’s March 2018 Exchange Review, monthly trading volume from Maltese-registered exchanges increased 56% since February, leading the crypto market by volume.

Cryptocurrency trading volume per jurisdiction in MarchSource: CryptoCompare Exchange Review

Behind Malta were Hong Kong and South Korea, as these countries saw trading volume flowing through exchanges registered there by 54% and 21% respectively. The report notes that in March, Malta-registered exchanges traded $56.1 billion, while those in Hong Kong traded $53.1 billion, and those in South Korea traded $40.2 billion.

While Binance and OKEx helped Malta lead the crypto markets by trading volume, various cryptocurrency exchanges including LBank, BitZ, and HitBTC helped Hong Kong get to second place. South Korea’s place was achieved thanks to UPBit and the controversial Bithumb.

Other countries in Europe notably stayed at the bottom of the pack when it comes to cryptocurrency exchanges’ trading volumes. Malta’s leadership can be attributed to its attitude towards blockchain and cryptocurrencies.

As covered the country’s Prime Minister, Joseph Muscat, revealed in September of last year he believes “blockchain makes cryptocurrencies the inevitable future of money.” Malta’s pro-crypto approach saw become the first country to put all educational certificates on the blockchain, and have a cryptocurrency-related conference. In it, OKEx was named “Crypto Exchange of Year.”

Despite its friendly approach, the ‘blockchain island’ has also issued warnings against “get-rich-quick” bitcoin scams and other allegedly fraudulent firms trying to swindle investors.