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.

BIS Digital Currency Hub Chaired by Former Bitcoin Detractor

  • New digital currency division of the Bank of International Settlements (BIS) will be chaired by Benoît Cœuré.
  • Cœuré previously called bitcoin the "evil spawn" of the 2008 financial crisis. 

A former European Central Bank board member who previously made scathing comments about bitcoin will chair a new division of the Bank of International Settlements (BIS) focused on digital currencies. 

According to the press release on Nov. 11, Benoît Cœuré has been appointed to head the BIS Innovation Hub, beginning January 15, 2020. Cœuré, while still an executive board member of the European Central Bank, made headlines last year after telling Bloomberg that bitcoin was the “evil spawn of the [2008] financial crisis.”

Cœuré’s new position will oversee the BIS’s exploration into digital currencies and financial innovation. 

According to the release, 

The Hub's mandate is to identify, and develop in-depth insights into critical trends in technology affecting central banking; develop public goods in the technology space geared towards improving the functioning of the global financial system, and serve as a focal point for a network of central bank experts on innovation.

Agustin Carstens, General Manager of the BIS, said he is “delighted” to have Cœuré lead the Hub, and that the initiative reflects commitment by central banks to lay the foundation for financial innovation. 

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