Institutional crypto custody: How banks are housing digital assets

cointelegraph.com:

Until 2020, most of the crypto market action was largely driven by retail enthusiasm. It was only around August 2020 that institutions started to participate meaningfully in this asset class. As the United States Federal Reserve unleashed trillions of dollars of liquidity into the market during the COVID-19 pandemic, retail and institutional investors jumped onto the cryptocurrency bandwagon.

While crypto loyalists claim large-scale institutional adoption over the last couple of years, the entire asset class is only around $1 trillion in size. That is quite small when compared to the gold market of $11 trillion and the bond market of over $100 trillion. There is still a long way to go for the institutional adoption of crypto and blockchain-based digital assets.

A quick look at Coinbase’s trading volumes below shows the rise of institutional capital in crypto. But, it is also clear that the institutional numbers are quite modest when compared to other asset classes.

Some institutions, particularly top-tier banks and fintech, have started building capabilities to offer digital asset products and services to their clients. This is because banks and fintech are starting to see crypto, nonfungible tokens (NFTs) and other digital assets as a systemically important asset class. Not offering these products and services to their clients would be leaving a pot of money on the table.

These clients that banks serve vary from hedge funds, asset managers, family offices, corporations, small and medium enterprises, to even retail customers. However, it is easier for banks to serve their institutional clients first, as they would have to go through lower regulatory hurdles than when serving a retail audience.

Financial institutions have