What is a Custodian?
“Nobody ever got fired for buying IBM.”
-Unknown
It’s likely that somebody did get fired for buying IBM at least once, but this quote highlights the reality of those who manage the money for some of the world’s biggest funds and wealthiest families: fund managers have careers to manage, and getting fired for buying a blue chip company is far less likely than getting fired for buying something as uncertain as bitcoin…a nine year old open source software project.
Canny speculators and high risk hedge funds have had no problem in buying and selling cryptocurrency, but those who manage institutional money-pensions, endowments, family offices-have been slow to join the party.
But in 2018, bitcoin and cryptocurrency have proven to be capable of explosive growth. As the cryptocurrency and blockchain asset class grew by more than an order of magnitude in 2017, many fund managers and investors realized there was much more “there” there than they had previously considered. The rewards began to justify the risk.
One problem remains: custody.
“Custody is the single biggest piece missing…from bringing institutional money in.”
-Mike Novogratz
A custodian is a specialized financial institution responsible for safeguarding a firm’s financial assets and is separate from the institution’s traditional business. As custodians handle millions (and sometimes billions) of dollars, there are very strict requirements for firms to be qualified. Banks and registered brokers or dealers often fill this role.
Legal custodians sometimes make investment decisions for clients, such as money held in a trust for a minor. Qualified Custodians - or QCs - ensure customers’ funds are safe from theft. QCs are generally very large firms that can keep track of the accounting for hundreds of millions of dollars worth of assets, including stocks, bonds, dividend collection, etc. In the past, a firm may have held stock certificates as part of its custodial duties; now, they hold the equivalent in electronic records.
While blockchain solutions allow individuals to take charge of their own finances and “be their own banks”, it is unlikely that most custodians are going anywhere soon, as qualified custodians are required for legal compliance.
Custodians also give their clients the peace of mind they need to invest their capital without having to think about the nuts and bolts of record keeping. In the case of blockchain tech, custodians handle the private keys of the coins held in their clients’ names.
There’s been a bit of a lag in matching custodial expertise in the blockchain to entrepreneurial expertise. That gap is closing as companies like Hedge are arriving, while Xapo has been storing bitcoins for customers for a few years and is the seasoned player in the space.
Nobody got fired for buying IBM. That phrase was updated to Microsoft at one point, and perhaps someday one might say the same thing about cryptocurrency:
Nobody got fired for buying Bitcoin.
That’s a future Hedge is helping to deliver.
What Hedge Offers
Security:
Hedge leads the industry in providing secure wallets with proprietary best in class distributed cold storage practices. The keys to your funds never touch the internet and cannot be stolen by hackers. There is no single point of failure that can jeopardize your fiduciary.
Applications:
Hedge offers application interface solutions to make your apps work with our apps. Small regional bank looking to compete? Incorporate Hedge’s APIs into your app and give your customers the ability to buy and sell bitcoin through your institution.
Hedge’s apps will also help usher in the ultimate HODLing tool: self directed IRAs. And companies that manage IRAs can use Hedge’s APIs to allow their customers to go (very) long on Bitcoin and Ethereum, with all the tax benefits that accompany them.
Access:
Hedge is the only firm in the industry that gives you 24/7 access to your funds. We net settle transactions in a proprietary process that maintains the safety of keys in cold storage, but with near real time trading.
Let Hedge manage blockchains; you manage your clients.
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