Recently the authorities in Hong Kong updated their regulations around digital currencies. The update introduced a deeper interest in the security of cryptocurrencies held by companies on behalf of their customers. This has fueled the creation of the first crypto custodial service which will serve firms affected by the new regulations.
Specifically, the new regulations stipulate that cryptocurrency exchanges plus crypto fund managers must “ensure their clients’ virtual assets are well protected.” Under the new regulations, firms managing cryptocurrency can choose between using a third-party custodian, provide custody service by themselves, or ‘park them at an exchange.’
To this effect, a Shanghai-based company, InVault, has been the first to offer a crypto custodial service in Hong Kong.
In mainland China, Invault is already offering a crypto custodial service with about one million ETH under its security. The company has obtained a new trust license from the ‘Hong Kong regulator and will start offering its fully automated service in December.’
According to Kenneth Xu, CEO, and founder of InVault:
“We believe that globally, custodians for cryptocurrency assets will be regulated and operated under a trust license.”
SCMP noted that the company will be keeping the clients’ private key in a physical vault. In the past, the crypto space has been affected by hacks which have seen cryptocurrency holders and exchanges to lose millions worth of digital currencies.
Most of the cases have been fueled by the clients or exchanges which have not been cautious in terms of securing their digital assets. It has also been aggravated by too much human involvement in the process of securing the virtual currencies.
With InVault’s introduction of an automatic crypto custodial service, Kenneth “believes trustees will play an increasingly significant role globally as a regulated conduit linking the cryptocurrency world with the formal financial system.”
Do you think a crypto custodial service will be the answer to digital assets finding their way to the hands of hackers?
Let us know your thoughts in the comments section below.
