Announcing: A Bitcoin Asset Management Platform Built On Multi-Institution Custody

Why Custody Matters

The first fifteen years of bitcoin’s existence have been fraught with custodial mishaps, from misplaced private keys to exchange hacks, and an array of failures in between. A first-of-its-kind, digital bearer instrument, secured via cryptographic material, bitcoin simply does not map neatly to the traditional financial world with respect to its inherent custodial properties.

While self-custody remains a worthwhile option for many individuals, the reality of the situation is multifold: (1) most institutions and HNWIs are not organizationally prepared and/or willing to take on the personal responsibility of securing cryptographic information (i.e., private keys), (2) the concept of custody through intermediaries dates back thousands of years and the modern financial system relies on third-party custodians to secure its assets and offer financial services, and (3) there are inherent limitations to the bitcoin protocol that would make it difficult for every person on earth to individually secure the asset in self-custody.

For these reasons, there must exist some level of custodianship for the bitcoin ecosystem in order for it to scale to the masses. Particularly in the institutional realm, trusted intermediaries are a necessary component of bitcoin’s broader adoption as a financial asset. As mentioned, however, bitcoin is a unique asset in that if a custodial arrangement is compromised, the bitcoin can be lost forever. Moreover, if you are outsourcing custody to a single entity, there are minimal assurances that the bitcoin won’t be rehypothecated or bailed into a bankruptcy if the entity becomes insolvent.

Therefore, trusting a single entity as a custodial counterparty, an industry norm in the traditional financial world, comes with tremendous risk. The status quo of obtaining bitcoin exposure with a single point of failure (i.e., a single custodian) not only infringes upon the underlying value proposition of bitcoin as a uniquely trust-minimized asset but has justifiably prevented large pools of capital from entering the space. It’s worth considering that unlike most traditional asset classes, bitcoin’s risk profile includes the material possibility that an allocation could go to zero, not due to an incorrect investment thesis, but simply the failures of a singularly trusted counterparty.