Safequant: Safe and secure storage of private keys, digital assets

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Recently, CoinGeek had the chance to catch up with Richard Shade, Head of Custody at Bequant.

Shade has been working in the traditional financial services industry for over 20 years at banks and exchanges, including Liffe and CME. He has many years’ experience implementing change and building new businesses. At CME he was part of the small team that launched CME Europe, CME’s London-based European Derivatives Market and one of only a handful of FCA Recognised Investment Exchanges. He was instrumental in launching and building their new markets such as Cocoa and FX futures. Shade moved to Bequant Group in 2019 to help build and launch their Digital Assets custodian Safequant.

In part one (of two) in our conversation, Shade told us what Bequant and Safequant are, what services they provide, what makes Bequant’s offerings so unique, as well as how providing service in the digital asset space differs from providing service in the traditional finance industry. Read part 2 of our interview here.

What is Bequant Group and what is SAFEQUANT?

Bequant Group (“Bequant”) is a digital assets firm with operations in London and Malta. Bequant is actually comprised of two companies, each with a unique offering targeted at sophisticated investors. Services include access to our spot exchange and our prime brokerage Bequant Pro; as well as our crypto fund administration service; and, of course, Safequant, our standalone custodian. These offerings, added together, create a one-stop-shop for all financial institutions in the digital asset markets. 

Safequant itself is an institutional-grade custody solution that can provide state of the art secure storage services to sophisticated market players, and high net worth individuals. Additionally, Safequant is as safe and secure as you would expect, and clients can move their funds quickly and efficiently if they need to base on market conditions; or even keep them secure to use as collateral to trade on Bequant Exchange or at Bequant Pro.

Which markets are you available in?

We are based in London and are open to most jurisdictions around the world, within the obvious KYC/AML rules and sanction lists, etc. In terms of coins, we are integrated with many crypto and digital assets, and are adding more each month.

What was the market opportunity that you identified when looking to establish Safequant?

Back in 2018, there was a lot of hype around building a custody solution aimed at institutions because such a service didn’t yet exist for digital and crypto assets. Our founder, George Zarya, had already launched Bequant Exchange at that point but had plans to build a custodian and a prime brokerage. Having come from a prime brokerage background himself, he realised what was missing in the landscape at the time and had the vision to create what was needed.

What does Safequant offer as a custodian?

Safequant offers safe and secure storage of private keys and digital assets. We have robust legal agreements in place with every client, which emphasise on protecting their ownership of the funds. We have a simple interface and a flexible, adaptable API that allows clients to withdraw funds, create addresses and set up whitelist addresses. We also set operational risk limits with every client so that we can ensure additional checks are carried out on withdrawals over a certain limit on a specific currency. Clients can set up access rights to match their operational needs.  

What differentiates Safequant from competing custodial services?

Competition is intense in this part of the industry. Many competitors offer similar ultra-secure platforms as well. But Safequant is tried and tested—the technology has been running custody for crypto assets since 2013 without any security incidents. I am under no delusions of grandeur—Safequant is a small organisation compared to some of our competitors, but we can offer firms a personalised service that larger custodians can’t, alongside an ultra secure and high speed access system. Plus, the added advantage of our clients being able to use our other services within the group, makes our solution far more cost efficient.

What is it like to run a custodian service in the digital assets industry and how does this differ from custodians and settlement services in banking in traditional finance?

Running a digital and crypto assets custodian has its own unique challenges, but also a significant amount of similarities with traditional markets. In the financial services world, custodians have huge levels of regulatory oversight and then have to be able to deal with multiple different instruments, each with their own complexities and settlement cycles. We are seeing the regulatory oversight grow in our industry, which is great news and I welcome that (we have registered with the FCA and are currently going through that application process). 

Our emphasis right now is on security, and ensuring the safekeeping of these assets is one we take very seriously. For traditional custodians, they have very complex systems and have security at the heart of everything they do, but settlement is one area of difference. If a client is trading against collateral held at a custodian, then a settlement solution has to be put in place—this is not overly complex because, in digital asset markets, you don’t yet have corporate actions to worry about (such as stock splits, takeovers, etc). That will obviously change with the advent of security tokens, where digital assets are created on other financial instruments such as shares, and as strategies evolve to include activist investors and other traditional markets mainstays. 

Make sure you tune into CoinGeek Live conference on September 30 to watch Denis Vinokourov, Head of Research at Bequant, participate in The Future of Banking, Financial Products & Blockchain panel. If you have not already registered for CG Live or are looking for the full agenda, you can find more information here.

And look out for part two of our interview with Bequant. Part two of our conversation explores institutional investor’s attitudes toward digital currency and blockchain, what Bequant believes the barrier to adoption for institutional investors is and the misunderstandings about blockchain and digital currency that institutional investors have, as well as how regulation plays a role in these industries and what Bequant has in store for the future.