Due to the fact that cryptocurrencies are naturally decentralized, investors in assets like Bitcoin have been struggling with the security issue for years.
While a Ledger or Trezor cold storage device is often good enough for most consumer investors like you or I, institutions and larger holders aren’t exactly willing to put the safety of millions — sometimes billions — into a dinky little USB-looking device that can easily be lost.
Hence, firms have invested millions in launching custodial services, which provides extra layers of security to the cryptocurrency equation. Massive firms, like the Intercontinental Exchange through Bakkt and Wall Street’s Fidelity Investments, have already entered this subindustry.
But, startups native to the cryptocurrency industry have also made the plunge. Gemini, the New York-based Bitcoin exchange and Trust launched by the Winklevoss Twins of Facebook & Olympics fame, is the latest industry staple to have launched custodial services.
We recognized the need for a:
-Cost-effective #cryptocustody solution, for both personal and institutional use.
— Gemini (@Gemini) September 10, 2019
Winklevoss Twins Launch Custody Service
On Tuesday, Gemini unveiled Gemini Custody, which it billed as “Institutional-grade crypto storage. Industry-leading security”. According to the new web page outlining Gemini’s latest offering, this service will allow investors to store 18 cryptocurrencies and tokens — everything from Bitcoin and Ethereum to MakerDAO/DAI and Basic Attention Token — in a company-run “cold storage” solution.
The other assets supported are Litecoin, Bitcoin Cash, and an array of popular ERC-20 tokens — including Gemini’s in-house stablecoin, the Gemini Dollar. Gemini CEO Tyler Winklevoss chalked the launch of this product in the following succinct statement:
“From day one, Gemini recognized the need for a world-class custody solution that is secure, compliant, and easy to use for individuals and institutions around the world.”
While this sounds like just another custody solution to add to the mix, Jeanine Hightower-Sellitto, Gemini’s Managing Director of Operations, told The Block in an interview that Gemini’s product differs from the rest of the pack.
The executive mentioned the fact that Gemini Custody will be supporting something the firm calls “instant trading”, giving institutions the opportunity to trade cryptocurrencies from a secure environment.
SEC On Bitcoin ETF: Custody is the #1 Concern
Gemini’s new product comes at a perfect time. Speaking to CNBC’s “The Exchange” anchor, Bob Pisani, on Monday, the chairman of the Securities and Exchange Commission (SEC) asserted that the security of Bitcoin holdings is his organization’s most prominent concern with the cryptocurrency market.
Chairman Jay Clayton said that for the SEC to consider a Bitcoin ETF, a proper security solution for the underlying coins needs to be had. The regulator did not hint whether or not he believes the current solutions from players like Fidelity or Coinbase are good enough. Yet, it is likely a reassuring sign for Bitcoin ETF hopefuls that there is so much being put into ensuring that cryptocurrencies held for institutions are kept secure.
May Help Institutions Go Crypto
Even if the launch of Gemini’s custodial product and other ventures like it don’t catalyze the SEC to give a Bitcoin ETF its green light, it may entice institutions to continue to foray into the industry.
You see, institutions, as aforementioned, are unlikely to trust the current consumer-grade custody solutions that exist in their market, even if they are provably secure and work for mom & pop investors. When millions of dollars are on the line, this makes sense.
Solutions like the one Gemini just launched, however, likely only improves the likelihood of institutions delving into cryptocurrencies. Former Wall Streeter Mike Novogratz last year famously said that the launch of “world-class” custody by Fidelity could be an impetus for institutions to make an investment in cryptocurrency.
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