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Zodia Custody Launches Institutional Staking in Partnership with Blockdaemon

Zodia Custody Launches Institutional Staking in Partnership with Blockdaemon

Partnership will enable “Staking 2.0” — compliant, secure staking for institutional investors

London, UK and New York, USA — 06 June 2023 — Zodia Custody, a leading institution-first digital asset custodian by Standard Chartered in association with Northern Trust and SBI Holdings, has partnered with Blockdaemon, the leading institutional-grade blockchain infrastructure company, to become the first bank-owned and FCA-registered custodian to offer staking services to institutional clients. 

Proof-of-Stake consensus mechanisms represent a large portion of the world’s total blockchain industry, with growing institutional interest. The combined offering from both Zodia Custody and Blockdaemon will represent an evolution of current approaches to staking for institutional investors. Dubbed “Staking 2.0”, the partnership has developed a model that provides greater assurances for institutions through seamless security measures across both the Blockdaemon and Zodia Custody infrastructures. 

Backed by Standard Chartered, Northern Trust and SBI Holdings, Zodia Custody brings an established digital asset custodian approach to the market and combines that with the agility of a fintech company. In partnership with Blockdaemon, Zodia Custody will be able to offer innovative staking solutions to meet the uncompromisable standards of institutional investors through a single platform that enables clients to get staking rewards. Zodia Custody will ensure that the “Staking 2.0” service is clearly priced, to provide complete transparency to their institutional investors.

For institutional investors using Zodia Custody’s services, automated staking and reward operations will be enabled from day one of the service going live, scaled on an institutional level and with full automation to minimize the risk of manual errors. The service has been designed to be as frictionless as possible to ensure it can be quickly enabled to maximize rewards. Through Blockdaemon, it will also integrate a tried and tested ETH validator exit process — bolstered by Blockdaemon’s record of 99.9% validator uptime — to enable institutions to manage their ETH liquidity efficiently. 

“Staking 2.0 makes the process of receiving staking rewards simpler and more convenient, all while lowering the risks for both institutions and their customers,” said Konstantin Richter, CEO and Founder of Blockdaemon. “Our strong partnership with Zodia allows stronger security, automation and simplification of the process to participate in staking, truly accelerating web3 innovation.”

“This partnership with Blockdaemon is how we are evolving staking specifically for institutions. This is staking, without compromise,” said Julian Sawyer, CEO of Zodia Custody. “By leveraging Blockdaemon’s expertise, together we are not just meeting the needs of institutional investors, but also developing new opportunities for market participants to yield results.” 

Zodia Custody’s mission to better develop the infrastructure and ecosystem for institutional participation in digital assets is reinforced by Blockdaemon’s security first approach to blockchain infrastructure, which includes four layers of risk mitigation, 100% slashing insurance guarantee, smart contract audits and ISO 27001 Certification. Through “Staking 2.0”, both Zodia Custody and Blockdaemon pledge to consistently adhere to the highest industry standards of compliance and security.

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For further information, please contact:

Rich Went

Gallium Ventures

+44 (0) 7745 496 065

[email protected] 

LMAX Digital Partners with Zodia Custody to provide institutional-grade trading and custody solutions for CoinShares

London and New York — 17th May, 2023 — Zodia Custody, a leading institution-first digital asset custodian by Standard Chartered in association with Northern Trust, and LMAX Digital, the regulated institutional crypto currency exchange operated by LMAX Group, today announce a collaboration to deliver institutional-grade trading infrastructure and custody services for the European leading Alternative Asset Manager specialising in digital assets, CoinShares.

The collaboration between three leading institutional participants in the digital assets ecosystem comes at a time when the separation of exchange execution from custody, clearing and settlement functions is at the forefront of customer demands, as investors look to reduce concentration risk and implement more robust measurements to maintain security of assets. 

CoinShares will benefit from a fully segregated custodian solution by leveraging Interchange, the market-leading, off-exchange settlement product from Zodia Custody and connectivity to LMAX Digital, a regulated exchange venue which operates with best-of-breed security, compliance, KYC and anti-money laundering policies and procedures. Zodia’s Interchange provides independent effective safeguarding of digital assets whilst reducing the counterparty risk exposure for CoinShares, enabling the firm to retain full control of its assets and complete protection through settlement obligations. 

As the pace of tokenisation gathers momentum and digital assets increasingly converge with traditional capital markets, so demand for regulated trading infrastructure and efficient price discovery within the industry grows. LMAX Digital is a leading institutional spot crypto currency exchange and a primary price discovery venue for global market participants. 

“CoinShares’ DNA promotes enhanced security and transparency through collaboration with regulated market players. This joint effort with Zodia Custody and LMAX Digital is aligned with our long-term strategy. We are committed to shape a reference standard for digital asset management. This underscores the importance of our duty of care for our stakeholders. We are expecting the rest of the industry to follow through.” said Jean-Marie Mognetti, CEO, CoinShares.

As Europe’s premier Alternative Asset Manager specialising in digital assets, the move is part of CoinShares’ mission to provide access to a trusted, registered, and best-in-class product suite for all investors. The collaboration to implement Interchange also reinforces CoinShares’ advocacy for stronger digital asset regulation, particularly in providing products that adhere to both existing regulations and similar regulatory best practices in traditional financial markets. 

“The digital asset market needs to evolve. Investors are demanding greater assurance and rigour across the entire ecosystem. Interchange is our answer to how we can help the market respond to those concerns,” said Julian Sawyer, CEO, Zodia Custody. “We have listened to the needs of institutional investors and have delivered a solution that combines digital asset-native technology with bank-level compliance and governance. Our collaboration with LMAX Digital and CoinShares is indicative of how the digital asset ecosystem can mature — namely, through collaboration to develop an infrastructure that is fit for purpose.”

“In the wake of recent industry events, the segregation of crypto market services and effective corporate governance and controls is more important for institutions than ever. By bringing together our regulated exchange infrastructure with the regulated custodial services of Zodia Custody, we are able to offer a robust, institutional-grade solution that benefits clients such as CoinShares, whilst building a better market structure for all participants in the digital assets ecosystem. At LMAX Digital we are determined to remain at the very forefront of innovation and technological development to serve the rapidly evolving needs of our institutional clients,” added Jenna Wright, Managing Director, LMAX Digital.  

The collaboration with LMAX Digital and CoinShares marks the start of an upcoming period of growth for Zodia Custody’s Interchange product. The digital asset custodian is currently working with several key strategic partners to implement Interchange, as part of a move from institutions and exchanges alike to mature digital asset infrastructure. 

For further information, please contact:

Rich Went

 Gallium Ventures

+44 (0) 7745 496 065

[email protected]

Introducing the Zodia Professional Advisors Network

The Zodia Professional Advisors Network (ZPAN)
is a space for those who want to help realise the potential of the digital asset future.

At Zodia, we believe a mature ecosystem with serious actors is required for digital assets to grow and thrive as an asset class. ZPAN aims to combine the traditional and digital asset worlds and to empower one another to fearlessly embrace the digital asset future. Through a series of events, blogs, webinars and roundtables, we will work with like-minded firms and professionals to facilitate important conversations, boost knowledge sharing and encourage collaboration to build that ecosystem. If you would like to join our network of fellow professional advisors, then please do get in touch below:

How to sleep better at night: Robust custody for digital assets

If you’re an asset manager or institutional investor venturing into digital assets, you’re probably worrying about custody. The digital asset ecosystem is growing fast, and its value tipped over $3 trillion at one point in 2021 – comparable to the market capitalisation of some of the largest stock exchanges in Europe. We’re no longer just talking about cryptocurrencies and NFTs but also emerging are the tokenised versions of traditional assets like bonds and equities. As the market continues to mature, institutional investors will be holding digital assets in increasingly meaningful amounts and need to hold them securely. However, the recent collapse of FTX, with customer losses potentially in the billions of dollars, is hardly reassuring. What’s more, a record $3.8 billion of cryptocurrency was stolen by hackers in 2022, according to research by Chainalysis.

In this environment, it’s not surprising that many investors are looking to “self-custody” their digital assets. There’s a popular saying in crypto world: “Not your keys, not your coins”. Storage of digital assets is all about keys and wallets, specifically the public and private keys of the asset owner, and the software or hardware devices where the private keys are stored. The argument goes that if you use a third-party provider to store the keys then you don’t really own those assets.

Why the temptation to self-custody?

On the surface, it makes sense that asset owners control their own private keys. Self-custody comes in many forms, from the most basic to the highly sophisticated. You may have come across the terms “hot storage” and “cold storage” for digital assets. Hot storage simply means that the wallet is connected to a network (e.g. the internet). For an individual investor, this could mean downloading software and creating a wallet on a smartphone. This is perceived as more secure than storing keys in an Exchange account. However, as the wallet is online, it is vulnerable to multiple methods of attack. Cold storage, by contrast, is offline and can be anything from specialised hardware in a secure location to a USB stick or printout of private keys kept in a safety deposit box. Cold storage can’t be hacked as it is not connected to the internet but often there are tradeoffs in terms of convenience and accessibility.

For businesses and institutions, there are self-custody solutions on the market that are highly secure and very sophisticated. These can combine hot, cold and “warm” storage, often with additional security features such as Multi-Party Computation (MPC), where private keys are divided and stored across multiple devices, or Multisignature, where transactions must be authorised by multiple parties each with their own private keys.

Whilst these could be a viable solution for some businesses but not, we’d argue, for every business. This isn’t about degrees of security but more a fundamental question about what “custody” really means.

Don’t sleepwalk into a pseudo-solution

Some of the momentum behind self-custody springs from a distrust of the financial system among early advocates of cryptocurrencies. Ironically, the collapse of some crypto exchanges – where many retail investors kept assets in online accounts – have helped to reinforce this point. However, for institutional investors and asset managers, the idea of trusting another financial institution to safeguard client assets isn’t abhorrent but fundamental. Self-custody can be very secure in a technical sense, but it isn’t custody in the way that most financial institutions – and their customers – think about it. Buying some advanced software or hardware doesn’t make you a custodian, and the business of safeguarding assets – particularly digital assets – is more complex and multi-layered than you might imagine.

Firstly, your organisation is now responsible for safeguarding the assets but must rely on a different entity (the technology provider) to do the extensive stress testing, ethical hacking and ongoing system upgrades needed to keep them safe. Have you done the right due diligence, and what recourse do you have if the system fails? If you choose to bring some technology functions in-house, how do you get the right expertise? Secondly, how will you keep any physical hardware safe? If private keys are lost, whether through natural disaster, crime or accident, they are lost forever and the assets with them. And finally, this isn’t just a technical challenge but an organisational one. However strong its governance structure, an institutional investor or asset manager doesn’t have the independence or custody-specific operational procedures of a registered custodian with reputable regulatory entities such as FCA or CSSF. Internal fraud or error by an individual “superadmin” or small group can’t be discounted and, as digital assets grow, could have significant consequences. Finally, many financial institutions do not have the regulatory permissions to hold client assets resulting in having to use a 3rd party custodian. A self-custody solution, rather than relieving stress, might actually cause more sleepless nights.

Sleep easier with an institution-first custodian

Institutional investors or asset managers will naturally turn to 3rd party custodians specialising in safeguarding assets. These firms are more than likely to build digital asset capabilities and provide custodial wallets. However, this isn’t a simple exercise. New digital assets are emerging all the time, storage technologies are highly sophisticated and the regulatory framework is evolving at different speeds across different jurisdictions. Furthermore, even the usual custodial functions like segregation of assets are inevitably more complex. These specialist custodians have the technology to keep the assets safe and, importantly, the licenses, regulatory approval, procedures, governance standards, segregation policies, insurance, anti-money laundering and Travel Rule checks and everything else that you’d expect from a custodian.

When it comes to technology, specialist custodians and self-custody providers can, in theory, use similar technologies for digital asset storage. In practice, however, the structure of an organisation can impact the choice of technology and how it is implemented. For example, a compliant custodian with audited procedures and internal controls is better placed to operate a robust multisignature approach, or to maintain and protect military-grade hardware, than another business using a self-custody solution bought from a third party.

From an institutional perspective, the concern about “Not your keys, not your coins” is misplaced too. Segregating assets is a primary function of a custodian. An authorised digital custodian holds your wallet, on your behalf and not co-mingled with its own or any other clients’. Your assets are your assets, even if you don’t directly hold the keys. Just like a traditional custodian, it also has procedures to identify the owner of the assets in the unlikely event of bankruptcy.

So, if you’re an institutional investor or asset manager looking at digital assets, there are specialist custody providers like Zodia Custody who can help you to invest safely.

Zodia Custody, a subsidiary of Standard Chartered and in association with Northern Trust, is a global institutional-first digital asset custody partner. Through the combination of leading technology, custody, governance and compliance, Zodia Custody satisfies the complex needs of institutional investors. The company is AMLD5 compliant and applies the same standards as Standard Chartered relating to AML, FCC, and KYC. It is also FATF Travel Rule-compliant. Zodia Custody Limited is registered with the FCA as a crypto asset business under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. Zodia Custody (Ireland) Limited is registered with the Central Bank of Ireland as a VASP under Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (as amended).

NFTs vs Ordinals

Non-fungible tokens (NFTs) have gained immense popularity in recent years, particularly on the Ethereum and other Ethereum Virtual Machine blockchains. However, NFTs require off-chain data storage, which is typically stored on the Interplanetary File System (IPFS). This decentralized storage system is similar to the blockchain’s hard drive.

On the other hand, the new Ordinals protocol enables data to be added to each satoshi (or “sat”), the smallest unit of Bitcoin, with each Bitcoin consisting of 100,000,000 sats. This creates a new type of digital asset known as an “Ordinal,” which is essentially an NFT that can be directly created on the Bitcoin blockchain. Unlike traditional Bitcoin transactions, which only involve sending and receiving value, Ordinals allow for the inclusion of smart contract code within a Bitcoin transaction. This code can then be used to create non-fungible tokens (NFTs) directly on the Bitcoin blockchain, effectively combining the benefits of NFTs with the security and reliability of the Bitcoin network.

While some projects update NFT metadata to improve image quality, this reliance on off-chain data storage has been criticized for creating an incomplete digital artifact. To address this issue, the Ordinals protocol inscribes all of its data directly on-chain, making them more complete digital artifacts than NFTs. Furthermore, Ordinals do not have creator royalties attached to them, which is a departure from the norm for most NFTs. This new development in the world of Bitcoin may signal a cultural shift for the cryptocurrency, as Ordinals challenge the current standard for digital art ownership and authentication.

This advancement in the world of NFTs and blockchain technology raises thought-provoking questions about the nature of digital ownership and the role of decentralized systems in authenticating digital artifacts. As we continue to explore the potential of these technologies, it will be fascinating to see how they evolve and impact various industries.

Zodia Custody, a subsidiary of Standard Chartered and in association with Northern Trust, is a global institutional-first digital asset custody partner. Through the combination of leading technology, custody, governance and compliance, Zodia Custody satisfies the complex needs of institutional investors. The company is AMLD5 compliant and applies the same standards as Standard Chartered relating to AML, FCC, and KYC. It is also FATF Travel Rule-compliant. Zodia Custody Limited is registered with the FCA as a crypto asset business under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. Zodia Custody (Ireland) Limited is registered with the Central Bank of Ireland as a VASP under Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (as amended).

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