Crypto custodians are in a race to build the next State Street or BNY Mellon.
There are only a handful of these types of large custody banks and most of them have been around for hundreds of years. But crypto is such a striking example of old world meeting new that it offers firms a rare opportunity to break into a market that would simply be impossible under normal circumstances.
“In the traditional world you can’t really build a custodian, it’s not something you can just break into,” said Diogo Monica, co-founder of Anchorage, a Silicon Valley-based custody platform specializing in crypto. “BNY Mellon has been around for 300 years and now, in crypto, we have a chance to actually build a foundational company that is potentially going to last for that long,” added Monica.
It’s an inspirational long view for sure, but how will things evolve over the short term?
Recent acquisitions in the crypto space have seen a bundling together of services such as custody, settlement, lending and trade execution. The latest push along the prime broker route came Wednesday with bitcoin futures platform Bakkt teaming up with Galaxy Digital to combine custodial and trading capabilities.
If crypto is entering a period of accelerated consolidation and following similar lines to the traditional world, firms specializing in standalone custody or trade execution may need to pivot to offer additional services or risk being swallowed up.