Deutsche Bank has joined a growing camp of large financial institutions that are exploring the storage of cryptocurrency. In the future, the bank’s representatives also plan to offer similar services to large hedge funds investing in a new asset class.
According to a report from the World Economic Forum, the Deutsche Bank Digital Asset Custody prototype aims to develop «a fully integrated storage platform for large clients and their digital assets, enabling seamless connectivity to the broader cryptocurrency market ecosystem.» That is, in general, the management is already ready to get involved with the blockchain asset market.
Let’s start with an explanation. The issue of proper storage of cryptocurrencies is always relevant within the blockchain asset industry. The fact is that to access the contents of cryptocurrency addresses, you need private keys or seed phrases – that is, unique combinations of letters and numbers or words in a certain order, which are a universal «password» for coins.
The peculiarity lies in the fact that these combinations must be carefully protected and at the same time not shown to anyone. Any owner of the private key can access the contents of the wallet, which is why theft of funds often occurs in the niche.
Naturally, for companies without understanding the intricacies of cryptocurrencies and blockchain, this requirement can cause problems. At the very least, it will not be easy for management to assign duties and responsibilities for storing important data. In this regard, it is easier for giants to turn to specialized companies that will store cryptocurrencies. The fiduciary service is called custodian.
For example, a custodian service was opened by Bakkt in November 2019. She was just focused on large investors who want to make money on the growth of the industry, but at the same time do not have the desire to be personally responsible for the safety of assets. Read more about this in a separate article.
Deutsche Bank and Bitcoin
Representatives of Germany’s largest bank say the organization plans to create a platform for trading and issuing tokens, link digital assets with traditional banking services, and manage multiple digital assets and fiat in one convenient environment. The company’s position was announced in a report, the contents of which are provided by Coindesk.
Large banks have now begun to be very active about their plans to create their own custodian infrastructure for cryptocurrencies. Recall that last week the Bank of New York Mellon, the oldest bank in America, joined the party. Prior to that, US banks received some regulatory clarity regarding the crypt thanks to clarification letters from the Office of the Comptroller last year. At the same time, financial institutions in Germany are lining up to obtain special licenses for storing cryptocurrency from the country’s regulator called BaFIN.
Deutsche, the 21st largest bank in the world, said its goal is «to ensure the safety and availability of assets for customers by offering institutional-grade solutions for storing digital assets.» At the same time, so far no specific cryptocurrencies or tokens have been mentioned in the announcement.
Note that this decision of the bank’s management sounds funny. Yet Deutsche Bank representatives have voiced criticism of cryptocurrencies in the past. In particular, at the beginning of 2020, the company’s analysts did not believe that blockchain coins could replace cash, and at the beginning of this they even stated that Bitcoin was a bubble. At the same time, now employees are ready to interact with digital assets and forget about their cues.
The digital asset storage platform will be launched in phases. Ultimately, this will provide customers with the ability to buy and sell digital assets through partnerships with major brokers who act as concierges for hedge funds, as well as issuers and trusted exchanges. The bank says it will also provide «additional services such as taxation, valuation and administration of funds, lending and rate placement.»
Apparently, Deutsche Bank will be another company that will join the cryptocurrency industry, despite previous criticism and negativity. As you can see this time, the bank is ready to interact with Bitcoin, although, according to their own statement, it is in a bubble. After all, if there is demand from customers, the company can turn a blind eye to its own arguments.
We believe this trend will continue. Companies will continue to explore the topic of cryptocurrencies, whatever their previous positions. After all, moving against the trend – especially with Bitcoin’s allies like Tesla, Twitter and MicroStrategy – is too difficult and unprofitable.