The post Redefining the Custody Standard for Banking appeared on BitcoinEthereumNews.com.
Welcome to the institutional newsletter, Crypto Long & Short. This week: Sygnum Bank’s Pascal Eberle writes that investors are recognizing that custody is less about holding assets and more about proving you’re holding them correctly. CoinDesk Indices’ Andy Baehr provides a “Vibe Check,” writing about how on the heels of NYC election day, among other political activity, the crypto market is awaiting a new leader to spark its next rally. In “Chart of the Week,” we examine the ETH price relative to average DeFi pool yields and BTC/ETH funding rates. -Alexandra Levis Expert Insights Redefining the Custody Standard for Banking – By Pascal Eberle, chief of staff, Sygnum Bank The walls between traditional and future finance are dissolving faster than most realize. Regulated institutions are no longer dismissing blockchain-native features. In fact, they’re adopting them. As a result, the next custody standard will be built on cryptographic accountability. Investors are recognizing that custody is less about holding assets and more about proving you’re holding them correctly. Multi-signature technology (multisig) provides that proof, continuously and cryptographically. Where traditional custody falls short Legacy custody operates on the premise of centralized control. When you deposit assets with a traditional custodian, you surrender authority to an external entity. This model demands absolute trust in institutional processes that remain invisible to clients and are based on legal/regulatory regimes, which can come with their own intricacies. This can create significant counterparty risk depending on the regulatory regime under which the lender operates. Certain regulatory regimes provide better customer protection than others. For instance, banks in Switzerland are legally required to segregate client assets, effectively making them bankruptcy remote, and collateral rehypothecation is not allowed unless the client explicitly agrees to it. However, this ultimately still requires trust in banks, the banking law and banking regulators to…