Investors want crypto custodians and Wall St. wants a slice of that

investmentnews.com:

Wall Street activity in the battle to provide custody services for the more than trillion-dollar digital-asset market is heating up rapidly, and in surprising ways, turning what would typically be considered a sleepy area of finance into one of the most lively sectors.

Nasdaq Inc. last week said it’s halting plans to launch its own cryptoasset custodian, citing a lack of business opportunities and an uncertain regulatory backdrop. Citigroup Inc. is reviewing its partnership with Swiss digital-asset custodial software provider Metaco Inc., which had been acquired by another crypto firm, while State Street axed a deal with London’s Copper Technologies. Elsewhere, Societe Generale was granted a license by France’s market regulator, allowing it to provide services for storing and safeguarding digital assets, while UK asset manager Schroders is on the hunt for a crypto custodian.  

A growing number of banks and institutions see profit potential arising from the surge in investor demand for third-party custody following the high-profile collapse of FTX and other crypto platforms last year, which left traders who had stored their coins on those venues nursing millions of dollars in losses. 

“Getting custody right has always been the most important thing for digital-asset investors from Day One, but risk tolerance has changed after last year’s multiple failures,” said Anatoly Crachilov, chief executive of Nickel Digital Asset Management, a London-based crypto fund. “Unfortunately, it took FTX for many investors to realize that the segregation of core functions, such as custody and matching engines, would offer critical protection to investors and help grow the space,” Crachilov added.

While this realization opened up