Tech
Cryptocurrency custodian technology firm Fireblocks seeks New York-regulated trust company
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Pending final regulatory approval from the NYDFS, Fireblocks Trust Company will offer cold storage storage to U.S. customers.
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Fireblocks’ Global Custodian Partner program will launch this quarter with an initial group of authorized companies based in the United States, United Arab Emirates, Great Britain, Singapore, Thailand and Australia.
Cryptocurrency custody specialist Fireblocks plans to create a limited purpose trust company under the supervision of the New York Department of Financial Services (NYDFS). Pending final regulatory approval, Fireblocks Trust Company will offer cold storage storage to U.S. customers, the company said Friday.
The New York-based company is also building a network of authorized custodians, the Global Custodian Partner Program, which will launch this quarter with an initial group of companies based in the United States, the United Arab Emirates, Great Britain, Singapore, Thailand and Australia.
Cryptocurrency custody is evolving in a post-FTX world, where new key-sharing technologies such as multi-party calculation (MPC), supported by Fireblocks, have been adopted by institutions looking for flexible ways to reduce counterparty risk. After thousands of FTX customers discovered their assets had been abandoned when the cryptocurrency exchange collapsed, there has been a shift towards self-custody, including greater reliance on risk mitigation technologies like MPC.
Fireblocks, which until now has been exclusively a software provider, acknowledged that some customers may need a custodian for regulatory or risk reasons. That said, Adam Levine, Fireblock’s senior vice president of partnerships, emphasized that the company remains committed to innovating with self-custody.
“We continue to believe everything we said about the importance of holding your assets and we will never go back on that,” Levine said in an interview. “But what is becoming apparent is that the United States lacks qualified custodians capable of focusing on digital assets.”
There is a political context to this. In February last year, proposed changes to the Securities and Exchange Commission’s (SEC) custody rule would, in theory, dramatically restrict the types of institutions where registered investment advisors (RIAs) could place their clients’ cryptocurrency. Part of a series of controversial and yet to be finalized changes known as SAB 12, only businesses such as registered broker-dealers and federally licensed banks would qualify, which is at odds with the current state licensing system.
“Our position is not to mock any regulator, any political party or the government,” Levine said. “We are simply applying the existing rules and regulatory framework. We know that there is a customer-based business need, based on market opportunities. We understand what the current regulatory framework is and SAB 121, as it stands, in the current view of federal and state regulators. We believe that obtaining the fiduciary license to become a qualified custodian was the right approach.”
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In terms of the custodial partner program, this will include licensed custodians using Fireblocks technology, and the company is talking to at least two or more vendors in each of the jurisdictions mentioned, Levine said. The trust company, which is expected to be operational in the coming months, will be the first qualified U.S. custodian in the partner program, but more are expected to follow, he said.
Fireblocks Trust Co.’s articles of incorporation were filed with the NYDFS on May 3, according to a I notify on the regulator’s website.
UPDATE (May 11, 01:40 UTC): Adds the sentence relating to the presentation to the NYDFS at the bottom; change “reveal” to “search” in the title.