British multinational bank Standard Chartered PLC (SCBFF) and Northern Trust Corporation (NTRS) are partnering to launch a crypto custody service targeted at institutional investors. Called Zodia, the new service will begin operations in 2021. It will provide custody services for the five most traded cryptocurrency assets – Bitcoin, Ethereum, XRP, Litecoin, and Bitcoin Cash – which together represent 80% of the total market capitalization of the cryptocurrency market.

"The introduction of digital custody backed by the know-how and experience of global banks is a breakthrough in the evolution and support of institutional cryptocurrency markets," stated Pete Cherecwich, president of Corporate & Institutional Services at Northern Trust.

Key Takeaways

  • Standard Chartered and Northern Trust are partnering to launch a crypto custody solution next year.
  • Standard Chartered is also reported to be prepping to launch a crypto trading solution next month.
  • These moves are part of a broader re-evaluation of crypto markets by institutional investors.

Northern Trust has been testing custody solutions for the market since 2018. Back then, the Chicago-based asset management giant said it was "developing a way" to offer custody services at a cheaper cost to competitors in the market. Subsequently, it expanded its roster of crypto services to include Net Asset Value (NAV) pricing arrangements, anti-money laundering (AML) compliance, and crypto-trade reconciliation.

A Crypto Trading Platform at Standard Chartered

Separately, Standard Chartered is also developing a crypto trading platform for the institutional market. Online publication Coindesk quotes anonymous sources as saying that the service will launch as soon as next month. The bank has partnered with "five of the biggest traders in digital assets and four exchanges" for the venture and plans to launch it with an Ethereum ERC-20 token that will function as a stablecoin or medium for transactions within the trading platform.

"We are building our own token of fiat collateral and hoping that will become the equivalent of Tether, except that the tokenized collateral or money will be held in the trading bank account of a proper bank, like a Standard Chartered, a JPMorgan, a Deutsche Bank," the source told Coindesk.

Standard Chartered and Northern Trust join Spanish bank Banco Bilbao Vizcaya Argentaria, S.A. (BBVA), which is also reported to be planning to offer crypto custody services, as institutions get into cryptocurrencies. Their moves are part of a broader trend among banks and institutional investors to re-evaluate their stance towards cryptocurrency markets.

In 2017, when crypto markets experienced a bubble that peaked with high prices, institutional investors and banks termed them a "fraud" and "rat poison squared." Recent regulatory clarity combined with infrastructural developments for financial and trading services have instigated a rethink. For example, Larry Fink, CEO of BlackRock, Inc. (BLK), the world's biggest asset manager, said recently that Bitcoin could evolve into a global market.