Coindesk reports that the pending futures exchange Bakkt has acquired the Digital Asset Custody Company and announced a partnership with global bank BNY Mellon to set up “geographically-distributed” private key storage.
These moves show how crypto businesses are now adopting well-established financial processes to secure assets for their customers and CRYPTOSTAR.MONEY lists many businesses in this sector. Money and value have been “dematerialised” for a long time and are typically stored in Oracle and SQL Server databases. These are very complex systems and very difficult to secure. In spite of these challenges, banks and custodians do an excellent job of looking after our money.
Why is it that crypto businesses who have a very simple technology designed for the secure storage of value seem to be so bad at it?
The answer is that the key risk is not the technology but the processes. Financial institutions rigorously follow the dictum that “vetted people use secured systems in controlled environments using monitored processes”. Compare this with the present generation of crypto fund managers who might be a smart graduate with a Ledger Nano working in his bedroom.
While many see cryptocurrencies as a way to overthrow the existing financial system, this move by Bakkt and BNY Mellon probably indicates the their true future. Cryptocurrencies will be “just another asset class” purchased by fund managers and stored by custodians. A diversified portfolio will include equities, bonds, property, gold and … Bitcoin.