InVault is the first third-party crypto custodian company to take advantage of recent changes to regulations enacted by the Securities and Futures Commission (SFC) in Hong Kong.
A recent article from the South China Morning Post reads:
After a recent announcement on the SFC website on November 1st this month, InVault launched its custodian services aimed at protecting digital assets belonging to trading platforms as well as fund managers in the country.
Within a recent press release, the SFC covered topics in regards to the current climate of the market as well as the secure management and investment of cryptocurrencies in the ex-British territory. The report reviews areas such as regulatory frameworks, fund manager portfolios, licensing processes, and security risks.
One key area the SFC insisted upon was that companies engaged in the management of digital assets use a custodian service, thus triggering the speedy introduction of InVault’s services from China into Hong Kong.
The custodian licensing is likely to be similar to that of the New York Department of Financial Services (NYDFS) regulations, which apply to the recently-launched Coinbase Custody in New York State. It seems that a rise of crypto-centric custodians could be on its way, which many may not have expected, especially considering the current bear market.
InVault Has Long Been A Chief Custodian Service in China
It comes as no surprise that InVault has become the first custodian firm to launch its services in Hong Kong. The company is perfectly poised from a location perspective and is already fully qualified for the job in hand as it already holds roughly one million Ethereum (ETH), valued at over $115 million, via its mainland China operations.
The much-respected cryptocurrency firm will be protecting digital assets mainly by safeguarding their clients’ passwords for their digital wallets. This solves some major concerns among many investors. When private keys are managed in-house, this can increase the risk of the keys being lost or compromised resulting in loss of access or unauthorized fraudulent transfers.
Rising Start-Up InVault Is Expanding in Asia
With its new trust license in Hong Kong and seed funding of $5.85 million from venture capital giant Matrix Partners China, InVault is beginning to demonstrate a trajectory that should ultimately lead to further expansion.
Kenneth Xu, founder and chief executive of InVault, sees the firm’s move into Hong Kong as an opportunity to show the international community that InVault provides trustworthy custodial solutions. This could open the doors for its unique offerings to expand globally.
They have also diversified their portfolio and service offering, by acquiring clients not only within the field of virtual currency but also within the realm of IT security. Additionally, the company invests heavily in research and development, a must in an ever-changing sector like cryptocurrency.
Security Risks For Cryptocurrency Investors Are High Says The SFC
The crypto community has seen its fair share of digital hacks as well as a host of other security concerns over the last few years. In January, the Japanese crypto exchange Coincheck suffered a $533 million hack and is just now beginning to recover.
Part of the SFC’s decision has been encouraged by such instances, thus encouraging investors to implement some level of protection, which means employing the services of third-party custodians.
The SFC also stresses the importance of ensuring individuals and companies look into the insurance coverage and policies of digital custodians, especially prior to making an investment decision. InVault is planning on offering insurance as part of their services and is currently evaluating insurers to partner with.
What Do Third-Party Cryptocurrency Custodians Mean for the Market?
A common concern within the cryptocurrency community with exchanges has always been that platforms who also act as custodians accentuate a conflict of interest. Such skeptics have also raised regulatory concerns in the past.
With third-party custodian solutions now beginning to take shape in both the USA, as well as Hong Kong, more faith and confidence in both security and regulatory compliance is being instilled into the digital currency marketplace.
This system mirrors that of traditional asset protection models used with fiat currencies in which investors have the option to use a third-party custodian to safeguard their own assets in an environment they feel is secure.
Despite the volatility in the market, those holding any type of digital asset still value their investment. With companies, such as InVault, offering a third-party custodian solution, this may begin to offset security concerns that have long plagued the industry. Overall, this should have a positive impact on the cryptocurrency market moving forward.