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Zodia Custody expands custody services to Governments and Law Enforcement  

Zodia Custody, a leading institution-first digital asset custodian with shareholders including Standard Chartered, SBI Holdings, and Northern Trust, has launched a dedicated Custody Service offering for governments and law enforcement bodies, to provide compliant, specialised custody services for seized and illicit digital assets.

The service provides parties involved in the asset seizure process with a chain of evidence and a means to swiftly and securely store, and ultimately dispose of, seized digital assets. Crucially, it also transfers the risk of holding these assets to a secure, bank-backed custodian that operates within the highest level of governance and regulatory compliance. 

Given the need for rapid action at times of asset seizure, the service ensures government bodies do not need to manage these high-risk assets and keys themselves, and instead have a swift, straightforward and low-risk solution to custody they can trust. As a bank-backed, FCA-registered custodian, Zodia Custody delivers a high level of digital asset expertise needed to meet these complex needs.

“We’re excited to expand our services to governments and law enforcement. Our unparalleled focus on security, robust compliance frameworks, and industry-leading licensing positions Zodia Custody as the perfect partner to navigate the complexities of digital assets.” said Julian Sawyer, CEO Zodia Custody. 

UK digital asset ETNs are coming! 

On Monday 11th March 24, the Financial Conduct Authority (FCA), announced they would ‘not object’ to issuers creating Bitcoin and Ethereum exchange traded products for professional investors.  

The FCA’s decision clears the path for UK-based, recognised investment exchanges, including the London Stock Exchange and CBOE UK, to accept applications from issuers seeking to list exchange-traded notes. This approval is contingent upon meeting existing listing requirements and specific criteria, such as the mandatory use of custodians, which are, for example, subject to anti-money laundering rules in the UK. 

First and foremost, this is another major developed market opening up institutional access to this digital asset class. We’ve seen the recent rapid success of the US Bitcoin Spot ETFs, with total Spot Bitcoin ETF AUM in excess of $56bn as at 20th March 2024. 

Fundamentally, these products reduce the barriers to entry, and mitigate risks, for institutions looking to invest in digital assets. This can be compared to buying gold exchange traded funds instead of physical gold. Trading a gold ETF is more convenient and less cumbersome than purchasing gold, where you get the exposure to the commodity without the additional costs around storage and insurance for example.   

Listed Digital Asset ETPs are subject to regulatory oversight, which provides investors with increased protection and transparency, compared to directly trading on largely unregulated cryptocurrency exchanges. Under listing requirements, they are also obliged to partner with reputable custodians like Zodia Custody, increasing benefits in the form of enhanced security, regulatory compliance, risk management, legal and fiduciary protection, as well as access to institutional services, all of which can result in enhanced confidence by investors who prioritise institutional grade services. 

Why the FCA announcing this is a positive step forward for the UK 

Ever since the privatisations of the 1980s, the UK, and more specifically the LSE, has been a symbol of the free market economy, with global giants such as Shell and HSBC deciding to list here. However, more recently, the UK has lost out on major IPOs and capital raising opportunities.  

Having banned crypto-related derivatives, which included exchange traded products, back in 2021, the FCA has revisited the decision on a total ban, most likely following the success of the US spot ETF. Having watched the UK equity markets lose their top position as the place to take a firm public, it’s encouraging to see the FCA move towards ensuring the UK becomes a go-to place to list digital asset products, particularly given UK Prime Mister, Rishi Sunak’s references to how he seeks for the UK to become an institutional crypto hub. 

ETNs vs ETFs – what’s in a name? 

It is interesting to note that the FCA has stopped short of approving ETFs, opting instead to signal no-objection to ETNs. 

While they both share many similarities – allowing investors to trade the underlying assets in a familiar, ‘securities like’ environment with transparency and liquidity – there are a couple of key differences that are worth highlighting: 

  1. ETFs issuers have to buy and hold the underlying assets whereas ETNs are primarily debt instruments, akin to bonds, that do not need to be backed by underlying assets. This means that while ETNs can generally track the referenced underlying asset more closely, they carry higher counterparty risk. 
  1. European ETFs are subject to UCITS minimum diversification requirement. ETNs are free of such requirement. 

Why has the FCA gone down the ETN path? 

An ETF will likely need to have an underlying basket of crypto assets to be compliant with the UCITS diversification requirement whereas an ETN can be a spot product.  The UK regulator has been clear that any crypto ETNs (cETNs) will only be available to sophisticated institutional investors as it maintains it position on the inherent riskiness of crypto. When pitched at institutional investors the only assets for a spot ETN that are mature and liquid enough to be palatable are likely to be BTC and ETH which cleverly keeps the UK aligned with the US ETF landscape.  The London Stock Exchange (LSE) has in fact expressly stated that any admissible ETNs will need to have BTC or ETH as underlying digital assets. The guidance from the LSE goes further and requires the ETNs to be physically backed (i.e. non-leveraged) which brings them even closer in structure to US spot ETFs, giving UK based issuers and investors a fantastic opportunity to benefit from this exciting asset class. 

Choosing Zodia as your launch partner: 

Whilst the news is still fresh, listed product issuers are currently strategizing on their go-to market plans. Arguably, one of the most important decisions that an issuer can make is selecting the right custody provider – this directly impacts the success of the product.  

At Zodia we have a proven track record of delivering excellence as the trusted custodian for multiple ETP’s across Europe to a variety of tier 1 issuers. There are numerous reasons as to why multiple issuers have put their faith in Zodia and why we are extremely well positioned to lead as the primary custodian for UK ETP’s: 

  1. Our custodial offering guarantees operational excellence allowing for efficient, compliant withdrawals in real-time from cold storage, eliminating the need for redemption batching.  
  1. Evidenced robust and effective institutional grade controls providing bank-grade protection over the underlying crypto. 
  1. Zodia goes above and beyond the strict requirements outlined by local regulators and exchange listing rules. 
  1. Proactive and regulation-first approach in our service offering. Expertise and track record as a custodian of staked ETP products. 
  1. We are more than just a custodial offering; we form strategic partnerships with issuers. Built by institutions, we utilise our heritage to widen distribution and attract institutional investors.  

Every issuer is provided with a dedicated relationship manager who specialises in ETPs, familiar with the operational flows and there to support from product inception to assist with strategic planning and ensure that products are launched smoothly and quickly. 

Choosing Zodia will help issuers fulfil the listing requirements! 

Should you wish to discuss further, get in touch with us here.  

DWS Group selects Zodia Custody for European exchange-traded products

Through the partnership, Zodia Custody provides its bank-grade custody services for DWS Group’s Xtrackers Galaxy Physical Bitcoin and Ethereum ETPs which were listed on Xetra today. Through the collaboration, investors in DWS Group’s ETPs are able to access a fully segregated and regulatory-compliant digital asset custodian solution. 

This includes Zodia Custody’s air-gapped cold storage security model, which is designed to maintain 24/7 availability of digital assets while removing them from threats, including exposure to unnecessary risk or potential loss.

“To deliver institutional-grade investment solutions, we need to work with high-quality providers. Through its discipline combined with a dedication to digital asset innovation, Zodia Custody is a proven fit for our Xtrackers crypto ETPs,” said Sam Sadayo, Senior Product Development Manager, DWS Group. “With digital asset ETPs capturing the attention of the market, the combination of our education-first approach and partnering with institutional-grade service providers like Zodia provides a compelling offer. We look forward to working with Zodia Custody to further accelerate digital asset adoption.”

Alongside Zodia Custody, the ETPs leverage Coinbase’s custody services, with State Street also collaborating with the asset manager to provide issuing and paying agency as well as administration agency services. The products have been developed with Galaxy Digital, following a strategic partnership signed between the two in 2023, to advance European digital asset adoption. 

“This is exactly the type of collaboration we are built for — combining 160 years of banking experience with the latest in digital asset innovation,” said Julian Sawyer, CEO, Zodia Custody. “ETPs are the next evolution in institutional and investor participation, and as the leading custodian for TradFi institutions entering this space, we bring the rigour and regulatory compliance they require together with the very latest digital asset native technology. Together, we will provide effective and secure access to the ETP market, without compromise.”

Zodia Custody’s partnership with DWS Group follows several strategic moves from the digital asset custodian to shape the future of institutional participation. 

The custodian recently launched its Interchange Connect offering, a custody solutions network that integrates with Metaco, Fireblocks and Copper’s ClearLoop networks, making Zodia Custody the most connected custodian. The firm also released Zodia Custody Gateway — a curated, marketplace-like experience to help institutions discover select, vetted partners and services, designed to reduce the time and effort it takes for clients to select trusted providers and functionality. 

ETC Group enters strategic partnership with Zodia Custody for asset custody

The partnership will see a significant migration of assets from existing ETC Group products — including the recently launched ETC Group Ethereum Staking ETP (ET32) — to Zodia Custody. Specifically tailored to meet the rigorous requirements of institutional investors, the ETH Staking ETP offers greater outcomes when compared to other offerings or similar ETPs. It is the first real institutional-grade, low-cost, liquid, and transparent staking ETP, anchored to a genuine benchmark to ensure optimal investor outcomes. 

“With the digital asset ETP market accelerating at great speed, it is essential that we are able to provide investors with the best possible custody solutions. We see Zodia Custody as a new benchmark,” said Tim Bevan, CEO, ETC Group. “As our ETPs unlock a whole new level of institutional interest, it is essential that our ecosystem can provide the level of robustness required. With a banking heritage and digital asset native approach, we can deliver this confidently through Zodia Custody.” 

The deal between the two digital asset businesses comes as exchange-traded products are making a significant impact on the global digital asset ecosystem. The past month has seen around $2bn invested into digital asset ETPs per week, bolstered by significant BTC net exchange outflows from both Coinbase and Binance, implying increased institutional buying interest. 

Zodia Custody was selected by ETC Group due to its best-in-class approach. With shareholder DNA firmly rooted in global banking and financial services, Zodia Custody has always placed regulatory compliance at the forefront of its commercial philosophy, and is currently registered to operate in the UK, Ireland and Luxembourg. Zodia Custody also provides a rigorous approach to its custodial services, including the provision of Zodia Interchange, cold wallets with assets mirrored on trading venues, to provide both regulatory compliance and better risk management. 

“This partnership is a true endorsement of our approach and philosophy for the institutional future of digital assets,” said Julian Sawyer, CEO, Zodia Custody. “We have delivered the robust infrastructure needed to move digital assets into the mainstream for institutions — and our partnership with ETC Group shows that work is paying off. As the most connected and qualified custodian, we are building the future of digital assets.”

Zodia Custody’s latest major partnership deal follows the launch of several new major infrastructure products. This includes Zodia Custody Gateway — a curated, marketplace-like experience to help institutions discover and select, vetted partners and services. The custodian also recently launched its Interchange Connect offering, a digital asset custody solutions network that integrates with Metaco, Fireblocks and Copper’s ClearLoop networks, making it the most connected digital asset custodian.

Statement from Zodia Custody regarding ethical standards in the digital asset industry

Julian Sawyer, CEO, Zodia Custody, said:

“We are a company driven by the core values of good governance, transparency, and integrity. As such, we pride ourselves on working with like-minded entities who share this commitment to excellence.

“Over the last few days, a number of clients, exchanges and other market participants have spoken to us to share their concerns over the much-publicised event last week, initially reported by the Financial Times. We share these concerns. 

“We have today taken steps to ensure all our partners align with our values, respect and trust. This includes ceasing the partnership with Copper, effective immediately.

“Upholding the culture of the digital asset industry is a collective responsibility in which every market participant has a role to play. It is therefore our responsibility to withdraw from relationships where these mutual values are not practiced.”

Blockchain APAC Policy Week 2024: Australian digital assets businesses hungry for regulation

In a huge year for digital assets policy making in Australia, we’ve convened in Sydney alongside hundreds of other businesses, advisors and policy makers, for a week of focused but “complicated” debate for Blockchain APAC’s Policy Week 2024.

Across the week, which Zodia Custody is a proud sponsor and supporter of, we’ve participated in discussions helping to shape the narrative on digital assets and build our understanding of the impact of emerging regulatory clarity coming to our industry. 

Now is Australia’s chance to grab the opportunity

Policy Week kicked off with a speech by Kate Cooper, who fed us an appetiser of inspiration by challenging us to use this week to think about the 1% impact we could each make to the future of our industry. Drawing upon her time leading the Web 2.0 movement from UK Government, Kate reminded us how important this moment is for Australia to grab its opportunity to punch above its weight in Web 3.0.

But while we’re all thinking about how we might individually impact the industry, there’s an undercurrent of concern that as a nation, Australia runs the risk of turning up late to the party.

A balanced diet

A lot of interesting discussions examined the progress made by various global jurisdictions, with a particular eye on APAC cousins like Japan and Singapore. It seems like the jurisdictions with the best chance of responsibly grabbing the opportunity posed by digital assets are those that can strike the perfect balance between regulatory thoroughness and an openness to innovation. Too much analysis paralysis and deep focus on regulating the technology, and we might end up sluggishly stifling innovation in the long run. 

Hungry for regulatory clarity

The fear of sluggish progress and stifled innovation is real, and our industry is crying out for clarity. As Amanda Wick from Incite Consulting acknowledged, we need guardrails; we need frameworks to be successful. Australia has served up world class innovative digital asset businesses here, but some of our greatest talent and entrepreneurs hungry for regulatory clarity are starting to look overseas to jurisdictions perceived to be more open to supporting a digital asset future.

We heard from some of the largest crypto exchanges in Australia; BTC Markets and Independent Reserve, who are ready and waiting to apply for their licenses, as soon as there is the right clarity and timing to do so. The Treasury’s digital asset platform proposal paper released at the end of last year has been widely digested, and there is growing anticipation of what the final regulatory framework will look like, what the timelines are, whether there will be any deviation from the consultation paper, and importantly, whether new regulation will indeed nurture the industry.

As Caroline Bowler from BTC Markets put it, we’re looking forward to a regime that matches the ambition of the digital asset industry, and really hope that what’s put forward enables us to gallop ahead, and not just inch forward.

Try a compliance aperitif

Hannah Glass from King & Wood Mallesons offered some food for thought to those grumbling bellies hungry for regulatory clarity, suggesting that we can largely anticipate what Australia’s digital asset platform policy framework is likely to look like from the Treasury’s proposal paper, and that now is the time to do some kitchen prep. She suggested Australian digital asset businesses should be in a good position now to understand what their obligations are likely to be, and start shaping their operations to put themselves in the best position possible for when the proposed framework becomes law.

Michele Levine from Hamilton Locke framed this as “voluntary compliance”, and that prudent businesses could work to understand potential risks and how to mitigate them now. By operating as if they already have an Australian Financial Services License, by beginning to comply today, these hungry digital asset businesses will be ready for the Australian regulators’ main course tomorrow. 

The evolution of risk management within digital assets 

Risk management probably doesn’t come up first on the list of things people consider when thinking about digital assets. But it does for us: as the only bank-owned, FCA-registered custodian we are leading the way in harnessing how risk management principles can be leveraged from traditional finance and in fact, turbo charged within the digital asset ecosystem. 

As a digital asset custodian, Zodia Custody provides the critical plumbing of the digital asset ecosystem and by leveraging core partnerships and co-creating industry-leading security measures, we want to enable our clients to effectively manage their digital asset portfolio risks. That is why we are focused on curated Risk Management services, from fraud detection, cyber security, blockchain risk analytics, monitoring, insurance and more. 

For now, we’re proud to unveil a pioneering partnership with CUBE3.AI, a web3 security platform that provides real-time transaction protection for blockchains, safeguarding against cyber exploits, fraud, and compliance risks, by harnessing the power of AI and machine learning to inspect, monitor, and block security risks. 

As an immutable ledger of all activities, blockchains offer integrity and traceability. This makes auditing simpler, and lowers the risk of fraud. Blockchains’ transparency offers a level playing field for data while providing real-time visibility to identify inefficiencies or failures; but auditing and monitoring alone isn’t enough, and this is where the power of both blockchain and machine learning must be truly leveraged. This is why we are not just harnessing them, but are ahead of the curve in finding new ways to create value through our partnership with CUBE3.

Predictive risk 

It sounds like sci-fi, but our partnership with CUBE3 offers clients the prediction capabilities to foresee if your wallet address or smart contract could be attacked — with razor sharp precision through the use of AI and machine learning. 

This is a game-changer and can fundamentally shift how we manage risk. This is why we are currently working on a proof-of-concept to bring this capability to market. It’s an incredibly exciting project that exemplifies our dedication to not only harnessing blockchain but also creating more innovative value.

The critical role of custodians

While blockchains provide the technology and data to mitigate risk, it still needs to be actively managed. That’s where we come in. Our role is to enhance your confidence that your assets are safe with us, and that we can effectively mitigate any risks. As a mature ecosystem player with a bank-backed heritage, risk management at the core of everything we do. So we aren’t just prepared for the challenges or threats to your asset safety — we’re built to withstand them. 

Gateway to the future

Earlier this year, we launched Zodia Custody Gateway, a marketplace for curated services, connecting the best services and platforms the digital asset ecosystem has to offer. A one-stop shop.

We are taking this principle and applying it to risk management. We are working on multiple proof of concepts to build a platform where clients are able to see all their holdings with us, how safe these are, potential returns, and information on their centralisation risks.  The aim of this work is not just to consolidate risk management into a one-stop shop, but also to maximise your risk-reward return.

This will be transformative, and we want you to join us on this journey of innovation. If you’re interested in taking part, let’s start with a conversation about the future of risk. Contact us here.

Zodia Custody integrates with Digital Prime Technologies’ Tokenet to launch Collateral Protect  

Through Collateral Protect, institutions can now access best-in-class collateral protection services via Tokenet on Zodia Gateway, combining programmatic loan management capability with custody and administration of assets

The new service enables institutions to confidently access facilities for borrowing and lending of digital assets on Tokenet, while their collateral remains secured in Zodia Custody cold-storage wallets. 

Following traditional financial standards for best practice, Collateral Protect provides institutions with secure and seamless access to digital asset borrowing and lending markets through the Tokenet integration. The partnership creates an industry first in allowing counterparties to manage assets tied to a loan via a segregated, on-chain collateral account that is overlaid with Zodia’s bankruptcy remote structure. Institutions will also benefit from collateral schedule setup and ongoing monitoring through Tokenet, and Zodia’s robust wallet delegation control to protect both the borrower and secured party interests.

The integration marks a step change for the digital asset borrowing and lending space. The service is designed with an institutional-first approach, and delivers access to a bank-grade solution that safeguards digital assets throughout the lending lifecycle, while retaining access to real-time transactions from the security of cold storage — thereby unlocking the market for lenders and borrowers alike.

Institutions will also benefit from additional security features, such as minimised counterparty risk through on-chain segregated collateral accounts, liquidation risk management to help monitor all positions and ensure transparent collateral operations, and robust wallet delegation control, protecting both the borrower and the secured party interest as governed by Account Control Agreement requirements. Institutions will also enjoy added risk management assurances through Zodia Custody’s industry-leading dispute-handling wallet control structure.

“This integration throws the doors wide open for institutions to enter the digital borrowing and lending market,” says James Harris, Chief Commercial Officer, Zodia Custody. ”And for the first time, they can do so within the same rigorous security and compliance measures they’re used to from the traditional finance space. We’ve built frictionless capability enhancements for collateral protection.” 

Collateral Protect is made possible through the integration with Tokenet, and is the most advanced integration that Tokenet has supported to date. As both Zodia Custody and Digital Prime Technologies are regulation-first businesses, this also ensures added security for financial institutions to participate in the market while operating within the most robust regulatory framework available today. 

“As we continue our mission to deliver a product that helps provide transparency in the lending of Digital Assets, we are pleased to announce this partnership with Zodia Custody. We have been thoroughly impressed with their vision and commitment to their clients.” says James Runnels, CEO and Co-Founder of Digital Prime Technologies.

Collateral Protect represents the next category of offerings from Zodia Custody Gateway, the custodian’s marketplace that enables institutions to discover select, vetted partners and third-party services. 

Zodia Custody Hong Kong acquires Trust License (TCSP license) to bring custody services to the market 

Zodia Custody (HK), a leading institution-first provider of digital asset custody solutions backed by Standard Chartered, has been granted a Trust or Company Service Provider (TCSP) License in Hong Kong. Marking a pivotal development for Zodia Custody (HK), it enables the firm to offer comprehensive custody services for digital assets under the TCSP Licensing Regime. 

Acquiring the TCSP License is a significant milestone for Zodia Custody (HK) in solidifying the firm’s position as a prominent player in the digital asset custody market in Hong Kong. 

As a key geography for the global digital asset ecosystem, this crucial achievement enables Zodia Custody (HK) to cater to the needs of both local and international institutional clients. This includes providing institutions operating in the region with a robust, trusted and regulated platform, as well as infrastructure that complies with TCSP requirements. 

Zodia Custody appoints Kal Chan as Hong Kong CEO 

As CEO, Chan will spearhead the firm’s growth in Hong Kong, one of the key markets for Zodia Custody, focusing on continuously meeting the precise demands of the city’s financial institutions and catering to their needs. His main ambition is to drive rapid digital asset adoption in the region by offering institutions leading-edge technology, stringent risk management, and bank-grade compliance and governance.

“Hong Kong isn’t just a major hub for digital assets in Asia, it is leading the world in showing the pathway to mainstream adoption,” said Kal Chan, CEO of Zodia Custody Hong Kong. “Zodia Custody is determined to contribute to that objective, closely working with regulators and ensuring that we are leveraging our bank-backed heritage to quickly respond to both regulatory and institutional needs. Hong Kong represents a major opportunity for both us and the digital asset ecosystem around the world — we are dedicated to being at the front and centre of this hotbed of innovation and development.” 

Chan joins the business from Aquanow, where he led its APAC business development effort in the APAC region. Prior to his previous role at Aquanow, Chan worked in senior roles across both traditional and decentralised finance, including the Intercontinental Exchange (ICE) and Cboe Global Markets, with his latest roles focusing on digital asset solutions and their growth in APAC. 

“Just as it is for the global digital asset ecosystem, Hong Kong is an essential place for us,” said Julian Sawyer, CEO, Zodia Custody. “Combining a long heritage in traditional finance and forward thinking approaches to digital assets, the Hong Kong ecosystem perfectly aligns with our own origins and future direction. As such, Kal is exactly the right person to take us forward here, bringing unmatched experience and a deep understanding of the institutional digital asset ecosystem.” 

To date, Zodia Custody operates in the United Kingdom, Ireland, Luxembourg, Hong Kong, Singapore, Japan and Australia. 

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