Institutional investors are looking for familiar names to provide their crypto services, and Wall Street is delivering.
BNY Mellon, America’s oldest bank and one of the more crypto-friendly institutions, said earlier this month that select institutional clients will be able to hold and transfer bitcoin and ether through its new crypto custody offering. Nasdaq said in September it would be looking into offering similar services. Boston-based State Street has been plotting its crypto custody plans since March 2022 when it revealed its partnership with crypto-native Copper.
The trend is not surprising, Talia Klein, BNY Mellon’s head of digital asset custody commercial product, said during a Blockworks webinar this week.
“We’re seeing a lot of institutional interest [in crypto,]” Klein said. “As you think about what is prohibiting others from getting into the space, what we’ve seen is that people require an institutional grade provider.”
In a research report published alongside its custody announcement, BNY Mellon reported 70% of institutional investors surveyed would “increase their digital asset activity if services like custody and execution are available from recognized, trusted institutions.”
Institutional investors are more concerned about getting into crypto in a safe and compliant manner instead of jumping in immediately with hopes of high returns, Matthew Savarese, vice president and global head of strategy at Nasdaq, added.
“Twelve months ago, everyone was worried about how to get into the space in the quickest way possible,” Savarese said. “Now, with the so-called crypto winter, people are taking a step back to say, ‘All right, let’s assess to make sure that we’re solving for information security, market fragmentation, liquidity, understanding what credit intermediation is, what quality execution looks like.’”
More options are available today, Savarese added, from both traditional financial institutions and crypto-native companies.
The current regulatory environment is also weighing on institutional investors and slowing their entry into the space, webinar panelists agreed.
“Whenever you’re operating in an environment like this, where this industry is rapidly evolving…we’re trying to stay one one step ahead,” said Geoffrey Clauss, chief revenue officer at blockchain infrastructure provider Blockdaemon.