IBM Makes Quiet Entry into the Crypto Custody Space

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by Teuta Franjkovic · 3 min read
IBM Makes Quiet Entry into the Crypto Custody Space
Photo: Alexa Steinbrück / Flickr

A New York investment firm, Shuttle Holdings announced that they will launch the beta version of a custody solution for digital assets built on IBM’s private cloud and encryption technologies, later this month.

The companies won’t be storing cryptocurrencies and tokens themselves, but are offering tools for others to do so. Shuttle’s chief investment officer Brad Chun explained that their potential users include banks, brokers, custodians, funds, family offices and high net worth investors who want to do self-custody, as well as exchanges. He said:

“We have a list of selected clients that we are launching limited service with this month. The service is not open to the public yet and there is a wait list to get into our beta.”

Much like other institutional players in this growing space, Shuttle has started small, offering its solution to a hand-picked list of clients that it believes can handle the cryptocurrency stress.

Unlike the cold storage solutions, the new custody service from Shuttle and IBM holds the private keys in a device that is separate from the network. Chun says that the use of these arrangements has been historically used to reduce the chance of an attack, but it is technologically “a little oxymoronic.”

While enterprises want the connection with customers and want to offer a secure setting to make assets readily available, this cold storage from Shuttle has created a system that could potentially be more secure.

The solution is built on a hardware security module that is entirely tamper-proof. Later, Chun noted that there is always some kind of compromise between security and efficiency, but this product is not like traditional cold storage options.

The keys remain encrypted in multiple layers, storing backups with existing disaster recovery and backup processes. In doing so, the IBM Cloud solution is more prepared for a future in digital assets. Once a particular “critical layer” is available, then the custodian solution will be available for all businesses, even in real estate and identity sectors.

Custody: A Growing Trend

This underscores the industry trend of custody of digital assets. Per previous reports, it has been officially confirmed that Fidelity Digital Asset Services (FDAS), the first fully-fledged crypto platform backed by Wall Street, has gone live.

Just for reminder, Fidelity Digital Assets, a company established by Fidelity has launched cryptocurrency custody and trade execution services. Currently, it is available now only for selected customers, with the customer base expected to expand in the near future.

Tom Jessop, a former Goldman Sachs executive turned head of FDAS, explained that his brainchild’s offerings are live for a select list of “eligible clients.” Jessop added that at the moment, the platform only supports Bitcoin, and will be staving off its verdict on Ethereum due to impending blockchain upgrades.

The director of IBM’s ‘Z as a Service’ cloud solution, Rohit Badlaney, also commented on this crypto-custody solution. He said:

“For DACS, the on-premise pervasive encryption capabilities offered by IBM LinuxONE was a key differentiator in choosing IBM as the most secure platform for their offering.”

Traditionally, crypto-custody was something that only wallet-makers or crypto-exchanges used to provide. However, of late, a number of tech firms have also begun to offer cryptocurrency custodial services. What has perhaps lured them towards it is the idea that big-money players (institutional investors) are soon expected to make a heavy investment in the cryptocurrency technology, and everyone wants to ensure that their product is out there before the bull-run begins.

With this transition, it looks like IBM is getting more involved in cryptocurrency, following the development of the private blockchain known as the Hyperledger Fabric. With the involvement of IBM with the Stellar foundation, it is clear that the tech company is journeying deeper into cryptocurrency than it was before.

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