What the Future of Finance Database says about the current state of the digital asset custody market
- Future of Finance
- Dec 15, 2023
- 2 min read
The Future of Finance database of digital asset custodians currently records a total of 115 separate providers, 13 more than the 102 recorded in the first issue of the DACG and 27 more than the 88 recorded in the first iteration of the database in 2022. (1)
An interesting question is whether this increase reflects an increase in the number of providers or an increase in the number of providers recorded in the Future of Finance database. The question is harder to answer than it appears.
The number of firms around the world that claim to offer digital asset custody greatly exceeds the number in the Future of Finance database. The number of digital asset service providers (DASPs) registered with the Autorité des marchés financiers (AMF) in France for example, totals 99, of which 88 - or 89 per cent – offer digital assets custody as a service. (2)
Similarly, the register of Virtual Asset Service Providers (VASPs) maintained by the Organismo degli Agenti e dei Mediatori (OAM) in Italy records 128 firms, of which most say they provide digital asset custody services. (3)
Many of the listed firms are registered under more than one guise in registers and in multiple jurisdictions around the world, so the risk of double counting is high. Many provide digital asset custody as a service to clients that want it, while they are waiting for the real opportunity – tokenisation of securities and funds- to materialise.
A further problem is that in most countries - Germany is an exception - established banks do not need to acquire a specific digital asset custody licence but are instead granted an extension of their current licence or given permission to do digital asset custody business under an existing licence. In these cases, the only way to establish whether a firm is providing a digital asset custody service or not is when they announce publicly that they are.
To counter these challenges, only verified names are admitted to the Future of Finance database. In addition to the 115 firms now in the list, a steady flow are currently under review to assess whether they are open for business and actually providing digital asset custody services or digital asset custody technology services to institutional clients. Firms offering digital asset custody on a white-label basis, or as a sales channel, are excluded. Firms that outsource elements of the custody service, on the other hand, are admitted provided the entity remains legally responsible for all aspects of the service.
At this point, it is safe to conclude that the digital asset custody industry is not expanding as fast as registrations with regulators might suggest. Instead, cryptocurrency intermediaries and trading platforms that provide wallets to customers are being brought within the regulatory perimeter through registration. A more accurate gauge of increased activity is the number of regulated banks providing digital asset custody services - but it offers an uncertain signal.
(1) Future of Finance, Digital Asset Custody: The Future Looks Like the Past, Issue 1, page 12.
Custody Market
