According to a report published yesterday by Bloomberg, the digital asset custody sector has huge growth potential and traditional financial firms are looking to gain a foothold in this space. Currently valued at around $300 million, the sector could grow by 30% year-on-year, according to some experts.
Interest in Crypto Storage Sector is Growing
Cryptocurrency storage is more complex and costly than traditional stocks. The sector, which has been dominated by crypto-focused firms like BitGo and Coinbase, is also starting to gain traction from traditional financial players, who are considering entering the space because they see the potential to make significant profits from digital assets.
In particular, major banks such as JP Morgan, State Street and BNY Mellon have either expressed interest or launched trial programs in the digital asset custody space. JP Morgan enables its customers to make payments using blockchain technology with a system it calls Onyx.
Regulatory Barriers
The biggest obstacle to growth in the sector is regulation. Regulations such as SAB121 from the US Securities and Exchange Commission (SEC) make it difficult for many traditional financial institutions to offer crypto custody services. While some banks have been granted exemptions under SAB121, the process has been criticized for its lack of transparency.
David Portilla of Davis Polk & Wardwell LLP said the current legal and oversight framework addresses many risks, but the SEC’s policy does not reflect this. As such, many financial institutions are pinning their hopes on the election results for a more crypto-friendly regulatory framework.
Impact of Election Results
BitStamp USA CEO Bobby Zagotta said that the election results could either accelerate or slow down developments in the crypto custody space. He noted that major Wall Street players will not miss this opportunity and that it could signal the evolution of the traditional services market.
The digital asset custody sector continues to attract interest from traditional financial institutions. However, there are regulatory hurdles to growth. Election results could play a significant role in overcoming these hurdles. Traditional financial firms will attempt to overcome legal and technological risks as they enter the sector.
Disclaimer: The information contained in this article does not contain investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should carry out their transactions in line with their own research.
