Updated: Apr 29, 2020
The crypto custodian industry, more broadly, is also growing. The Security and Exchange Commission (SEC) has raised concerns about how centralized cryptocurrency exchanges are safekeeping digital assets and abiding by AML (anti-money laundering) and KYC (know-your-customer) regulations.
Currently, North American cryptocurrency exchanges are subject to the same standard as money services, money transmitters, or payday loan establishments. They are not subject to the same regulations as a stock exchange that must comply with FINRA (Financial Industry Regulatory Authority) requirements. Decentralized exchanges operate differently in that a person or entity maintains custody until their funds are transferred or exchanged.
The Investment Advisers Act of 1940 requires fiduciaries to engage a custodian if their asset holdings are above $150 million. It is likely cryptocurrency investments will fall into this category and be required to comply. The SEC is asking for industry guidance as it reconsiders existing rules governing custodianship concerning cryptocurrency.
In the meantime, bitcoin bunker custodians are staking out a claim in cold storage offerings. Xapo and Vo1t won’t be the only bitcoin bunker players in the market. We are beginning to see a competitive race for dominance in the world of crypto security. At the same time, crypto criminals are becoming more cunning, more daring, and more willing to use maximum force and violence to break into these vaults and grab the digital gold.