Business

Steve Kaaru

IBM partners to launch crypto custody solution targeting banks

IBM has been one of the biggest investors in blockchain and cryptocurrencies. And now, it’s getting into the crypto custody business. According to a report by CoinDesk, the tech giant will provide the infrastructure for a crypto custody solution by Shuttle Holdings, a New York-based investment firm.

Shuttle already has a number of potential clients it intends to target with the product. They include high net worth individuals, custodians, banks, family offices and crypto funds. The company will not be storing the cryptos, Brad Chun, the chief investment officer at Shuttle explained. Instead, it will offer its clients the tools to store the cryptos themselves.

The product is not yet available to retail clients. However, Shuttle has already selected some clients for the pilot that launches later this month.

The custody solution will differ greatly from the cold storage solutions that most custodians use. In such solutions, the private keys are held in an offline device. This is to reduce the chances of an attack from hackers. 

“From a technology point, this sounds a little oxymoronic,” Chun believes.

According to him, institutions want a very secure crypto storage solution. However, they don’t want to sacrifice convenience to get this security. 

“Enterprises want to be able to connect to their customers and to have data and assets held in a readily available, yet secure setting,” he stated.

Shuttle has developed that long-awaited solution, he believes. Using IBM’s cloud and encryption technologies, its solution is “just as secure, if not more secure” than existing cold storage solutions.

The solution depends on a hardware security module (HSM) to safeguard the digital keys. Currently, Shuttle is using IBM’s HSM solutions. However, the solution is HSM-agnostic, Chun stated. “IBM has an HSM we are using but we can easily switch it based on customer needs and demands,” he said.

The crypto custody industry has been growing rapidly over the past two years. The emergence of institutional investors has been one of the biggest factors behind the rise. These investors can’t store their digital assets in the normal retail wallets, and many startups have sprung up to take advantage of this new opportunity. 

However, the industry is yet to get into a consensus on what the better storage method is: HSMs or cold storage. Alex Batlin, the CEO of crypto custody startup Trustology, believes cold storage is fatally flawed. 

“People like the sound of cold storage because it’s offline, but it’s really just replacing a network with a human, who can still be influenced to behave in nefarious ways,” he stated.

However, Mike Belshe disagrees and believes that clients prefer cold storage. Belshe is the CEO of BitGo, one of the biggest crypto custody solutions providers. According to him, clients prefer the peace of mind that comes with cold storage.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as SegWitCoin BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins. Altcoins, which value privacy, anonymity, and distance from government intervention, are referenced as dark coins.

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