How to build a cryptocurrency trading, investing and custody infrastructure for your clients

The market drivers
1. What is driving the rising institutional interest in cryptocurrency infrastructure?
2. Do banks see cryptocurrencies as an integral part of their digital assets strategies?

Making a choice
3. What is the minimum that regulated institutions need in terms of cryptocurrency infrastructure, i.e., what are the essential products needed by their clients and that they must provide?
4. Institutions have three choices: (a) building the infrastructure in-house, (b) buying it from a vendor or (c) outsourcing to an established cryptocurrency infrastructure. How should they choose between them?
5. Are regulated institutions free to make any choice they like, or do regulations limit the choices they can make (e.g., must regulated institutions deal with regulated counterparts only)?
6. How do cryptocurrency infrastructure needs differ between firms whose underlying clients are retail (B2B2C), institutional (B2B) and in-house (proprietary)?
7. How difficult is it to integrate a third-party brokerage and custody service into customer systems, staff and processes?
8. What governs the choice between buying cryptocurrency custody services from the same infrastructure provider that supplies the brokerage service and buying them separately from independent entities?
9. What are the pros and cons of white-labelling a third-party cryptocurrency infrastructure?
10. How can institutional firms ensure that the interests of their cryptocurrency infrastructure provider are aligned with their interests?
11. How important is the price of an outsourced service relative to providing the service in-house?

Making it work
12. Institutions seek infrastructure that delivers competitive pricing and efficient execution, which implies accessing multiple sources of liquidity, but the cryptocurrency markets are fragmented, and this has to be provided without compromising on the security of custody. How can institutions best manage the complexity?
13. What is the balance of advantage for institutions between dealing with a single broking counterparty and many broking counterparties (e.g., credit risk, concentration risk, margin call costs, reporting etc.)?
14. Is meeting best execution obligations feasible if a broker limits the number of exchanges and liquidity providers that are accessed?
15. What should institutions expect brokers to do to guarantee liquidity – the ability to buy and sell – in all market conditions?
16. Institutions will be concerned that their underlying clients will be made whole if their assets go missing. What sort of custody arrangements are best designed to deliver that assurance (e.g., direct, sub-custody, third-party independent, self-custody)?
17. How are customer assets in custody protected from a technical perspective (e.g., hot and cold wallets, MPC, governance, audits, insurance, regulatory oversight etc.)?
18. Should an infrastructure service incorporate additional cryptocurrency services, such as staking and lending?

Closing question
19. The cryptocurrency markets are still evolving, and so is the market infrastructure, but it is likely eventually to consolidate. How do you expect trading, inviting and custody to be supported in fully mature cryptocurrency markets?