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.

1.9 Million U.K. Residents Own Cryptocurrencies, FCA Research Finds

Research conducted by the United Kingdom’s Financial Conduct Authority (FCA) has found that 1.9 million U.K. residents currently own cryptocurrencies, while 2.6 million are estimated to have bought crypto “at some point.”

The research report published by the FCA into how consumers interact with cryptocurrency markets in the U.K. found that 3.86% of the country’s general adult population owns cryptocurrencies, as its adult population is estimated to be of approximately 50 million people.

To the FCA, there was a “statistically significant increase” in cryptocurrency holders throughout the UK as last year roughly 3% of the country’s adult population owned crypto at some point, and is now up to 5.35%. The rise brings to the total number of U.K. residents who ever held crypto up to 2.6 million, up from 1.5 million.

While the amount of adults owning crypto is relatively small compared to the total adult population, industry awareness appears to have hit a new high, as 73% of polled adults revealed they have heard of cryptocurrencies, up from 42% last year.

According to the FCA’s research, however, 75% of the 1.9 million people that currently hold crypto in the U.K. have less than £1,000 (around $1,230) in the space, with 83% of them buying their assets via exchanges that are not based in the U.K. Those who do buy crypto are nevertheless aware of the risks, per the FCA.

The report notes most “seem to understand the risks associated with the lack of protections, the high volatility of the product and have some understanding of the underlying technology. The report adds this isn’t the case for all:

Nevertheless, the lack of such knowledge among some presents potential consumer harm to consumers. 11% of current and previous cryptocurrency owners thought they were protected. This amounts to approximately 300,000 adults.

The most common reason for U.K. consumers to purchase crypto, it adds, was as a “gamble that could make or lose money.”

Crypto Ads' Influence 

The FCA’s report also found that 45% of current and former cryptocurrency holders had seen cryptocurrency-related ads. A total of 35%, around 400,000 people, said the crypto-related ads made them more likely to invest in the space.

Overall, 16% of those who have had or currently have cryptocurrencies revealed they have been influenced by crypto-related ads. The report, however, also claims the “media’s role in raising consumer awareness about cryptocurrencies has risen.”

As CryptoGlobe reported earlier this year, the FCA added nine new financial crypto companies to its warning list, as it has been ramping up efforts to keep consumers safe even if they are investing in the crypto space. Cryptocurrencies are not covered by consumer protections.

Featured image via Pixabay.