️‍️Institutional Custody Solutions: Safeguarding Digital Assets for Enterprises

[Music] good afternoon everyone uh my name is Daniel Kim uh CEO of taret research I'm really excited uh to be here and special thanks to H 71 hash for uh organizing this wonderful event personally speaking uh today we're going to talk about institutional custody solution right after as is amazing uh performance so uh hope it's going to be the most exciting session today uh today uh we're we have for leaders from Forefront on keeping the security and also the transparency of keeping our virtual assets and crypto safe uh and we have leaders from Babylon hex trust and defense I would like to take some moment for each speaker and panelist to introduce themselves and learn about what they do uh hello everyone my name is Fisher I'm the C of babyon labs uh babyon is a Bitcoin project that builds native use cases for Bitcoin uh what we would like bring offer to the Bitcoin holders is native trust list and self- custodial solutions for their bitco to put their Bitcoin into work so we are not custody ourselves but we work very closely with custodes yeah in bringing the most secure and awesome experience to to bitcoin holders hi to everyone philipo boy managing director of X trust Mina we are regulated custodian broker dealer and virtual asset manager here in Dubai under the regulatory framework of ARA uh hex trust is the leading Asian institutional digital asset custodian we have offices in Hong Kong Singapore of course here in Dubai and in Milan and I look forward to conversation hello everyone I'm Clarice you and founder of Defense we are a tech custody provider I think we'll go over the difference between what is a actual custodian and and a technology provider we provide our service to financial institutions Banks tokenization platform trading platform we've secured over six billion of volume and are generating are have about over a billion since September of volume for our platform uh and we've generated more than 10 million wallets for our clients including Fidelity International Jia custody tungsten and others thank you so much um I think we can first kick off with kind of discussing about with the recent market trends where a lot of people are excited about investing and building on blockchain um especially and there's also there's a high need for uh keeping and respecting the security and transparency as well as actively working on the blockchain so fiser I know you're one of the biggest staking platform for Bitcoin really excited how is babylon's protocol designed to meet specific needs of institutional clients in terms of security and transparency yeah sure so just for context of babon builds Bitcoin sing uh we are currently at the uh final stage of our phase one mandet as we are speaking we have over $3 billion dollar worth of bitcoin Stak in our platform and I think part of the reason why we can achieve this uh very impressive number it's the transparency and the self- custodian concept behind our staking because for especially for large institutes uh they care about the security of their fund um in front of anything else so the more uh intermediate agents in the process the higher the risk so when we design our protocol we like we we aim at minimize all the intermediaries in indeed we eliminate this completely making the taking uh completely trustless and self- custodian so that the institutes can feel very comfortable with uh our our protocol there's no counterparty risks yeah I'm sure there's a lot of customers both retail institution can you share one of good examples that you feel very comfortable about uh working on your uh Babylon examples of uh uh custodian partners partners exxtras TR ex trust ex trust uh uh enourage and seu yeah to to just name a few yeah and hobo yeah thank you very much so Filippo on that like hex trust you know there's there's a lot of news and there's a lot of excitement around what you do and especially you said uh they're building out very actively in Asia what do you see as the characteristic of each jurisdiction and what are the characteristic of like when you play yeah absolutely yes so since the very start of the company it has been quite of a journey we started our operations in Hong Kong and we moved across different jurisdiction following mostly regulation uh since the very beginning we wanted to create a bridge between digital asset finance and traditional Finance in a regulated way so uh at very beginning there was no regulation available in onon then we got our First Trust Company then we moved to Singapore we open an office there it took a very long time but we recently we received our major payment in intution license from the Mas and then we saw the opportunity here in UAE where there was the first established regulatory Authority focused exclusively on Virtual assets Vara so um this is really um has been a challenging process and there will be more we're now registering in uh Europe for MAA and I expect a lot of complexity but yes this is in an NAA answer I mean there's must be a lot of challenges when you work with all the jurisdictions and reg regulations and Regulators but see a lot of opportunities and optimism but can you share some lessons that you have learned at your team yeah absolutely um from a regulatory perspective different countries different Frameworks different requirements although there is more or less a certain standard um in terms of opportunities the real opportunity I see here compared to other jurisdiction is that there is a lot of appetite of institutional financial institutions to come into the space and obviously uh these institutions tend to come into the space through instruments that they know and they like for example ETFs but I believe that going down the line I think we will be more and more AB adoption uh on chain meaning we will be able to provide custody for physical Bitcoins and for example working with Fisher closely we will be able to allow institutional to provide we we will provide custody safe custody and then they will get access to staking in a regulated way through a at virtual ass service provider well thanks very much for sharing clar say I know U you're very active in Abu Dhabi and UAE congratulations on that um the defense is well known for it NPC based Security Solutions how does this technology address the specific security concerns of uh the clients so maybe I I'll take a minute to take a step back because I don't know what's your level of understanding on of institutional custody in this audience but you may have heard terms like self custo self custodial wallets non-custodial and it gets very confusing right so first there's a clear difference between the technology part of it right and the regulation so extrust is a regulated custodian we're a technology custody provider meaning that what we will do is enable our clients to actually safekeep their asset we're really a a tool for uh players to to enable them to not only secure their asset but also transact their Assets Now once you have said that when you look at technology and and at technology custody providers there's different solutions you can use you can use you've heard probably the words MPC smart wallets you've heard the words hsms there's many technology behind the interface of the tech custody Solutions you will use and you need to choose the one that is actually uh useful for your business and also your status as a financial institutions right are you trying to be regulated in which jurisdiction are you trying to be regulated because across the world you have Regulators that have set standards that vary uh in order to actually tell you and and and be able to issue a license for you right so for instance if you're based in Hong Kong and you want to get a license you will need to have 95% Cold Storage 5% OD storage in another terms right cold hot what does that mean this is just a level of temperature that actually tells you whether your custody solution your technology is online or offline so once we've put a bit more clarity between all these terms pretty much noncustodial custodial this is just a regulatory term MPC HSM this is the technology you will use hot cold this is whether your Tech your technology will be online or not then you need to figure out out and figure out your risk right so what who are your clients what what are the risk you're facing and depending on the risk you're facing you'll choose the right technology for The Right Use case with the right interfaces when we started we decided to actually uh uh um build our service on MPC technology for one very specific reason which is that MPC technology is a cryptographic protocol that enable to remove the single point of failure during the all life cycle of the key management in other words you generate your wallet the key is not present in its entirety you sign a transaction the key is not present in its entirety so there's not a single moment during the life cycle of the key Al so of your asset in which a hacker can come and hack and and steal the key right so we thought that this technology was the most advanced in term of security to be able to provide the Comfort to institutions to actually manage digital assets at scale online with lot of movement with lot of volumes so this this is one of the reason now we could drill into MPC because there's many kinds of MPC there many kinds of of of of uh difference around how it's implemented uh having say that MPC has also it's it's not just a Holy Grail right so you need to look into the detail it's not because you see that a provider is an NPC provider that it's shed the box that oh it's institutional grade right right so looking at the processes how it's implemented what are the certifications around that this is this is all very important now we do believe that MPC is very useful and will still play a big role in helping institutions safekeep digital asset but what we figured out as well over the years is that a lot of banks have been securing and managing private key for decades right they encryption Keys have been a subject for banks for the past 50 60 years and what are they using they're using hsms not MPC HSM is a technology that is actually standardized by nist like you know exactly what you're getting when you're buying an HSM that is FS fits to certified for instance um you don't know that with MPC MPC is a technology that is not as young as people think it's still 30 years old but it's not certified by the biggest security standards in the world so our team is working with n to provide standards so we can help this technology go go for the process and the audits of large institutions but if you're a bank that has already audited in HSM setup it's very very probable that what you will do is actually using the key infrastructure that you already have on Prem so we move from being an MPC only provider to enabling our clients to interact with any key deployment service that have already done because at the end of the day our mission is not to be opinionated about the technology is to provide the keys and the tools for our clients to one be compliant two get regulated and three build the use case they need to build thank you very much for a thorough explanation of the history and the categorization I'm sure a lot of our audiences was U evangelized for to say kind of moving on to uh custodial Solutions and practices uh in a relationship with regulations you know there's a lot of changing Trends around how we trade and store assets as well as evolving support as well as some friction with The Regulators uh Fisher like if I ask the questions um what do you see the like trending uh changes of of retail and institutions regarding C custodial Solutions and protocols and what how do you see the space evolving with working with The Regulators yes sure so uh the relation between the owner of the asset and uh custody is to some extent kind of tricky yeah some people believe they are counterparties but but to me I I feel the custodies they are actually the extensions of the of the actual asset asset holders to help them to manage their asset you much better way but starting from there if you enter the the on world then you become like the wild west is much more risky so to me like custody is the best friend yeah for both in for institutions previously retailers canot afford custodies right but now I think more and more it become more and more accessible which is a very good change if I may elaborate a bit on on this topic which is very interesting uh by operating here in the in the region by being regulated as a custodian I do realize how custodians are are the the very last mile of the permission part of the business so businesses come to us to keep their assets secure to be able to interact with Defi and fine enough obviously the regulator wants to regulate everything that is permissioned and we are very much permission as we are a centralized custodian but when it comes to defi it becomes very very complex to regulate so as a custodian we have free duties I believe that are important keeping assets safe being the gatekeeper of compliance but most importantly from a technological perspective we need to give access to the defi space because that BTC sitting there Idol do not go anywhere and being able to interact with thei we provide the E that the institutional clients today one thanks fipo and Fisher since you have the mic like can you like add on a little bit more about that what do you see as the increasing Trend or changing atmosphere around C uh custody Solutions when you operate in your region um changes and Trends in the yeah absolutely or like any predictions that you think will happen yeah yeah yeah so well obviously regulatory is an very important thing uh to be regulated you have to be centralized and we are very much a centralized uh custodian and then obviously technology is very important we have talked about HSM NPC actually we can collaborate on on different Technologies in order provide safe and secure solutions to clients interoperability and scalability is very important extremely important we need to be able with deal uh with different chains and a lot a lot of transactions compliance uh it is very much important especially when you face institutions it has to be automatic it has to have connections on chain you need to have auditable Trails because Regulators are really looking into it this is actually one of the main focus point of regulator that are laser focus kyc and cftd thank you very much thank you K say back to you um I mean in the previous comments we learned a lot about the history and the categorization of wallets and I really love how you say how you said like every customer or client has to adapt their own uh uh strategy for custodial not just NPC not just hot or cold but when it comes to when you work with like trading platforms what's like the relationship and how do you support then with maintaining security and also transparency yeah so there's several levels first when you work with a client that is regulated you need to enable them to be compliant so what it means is that you need to be a technology that is certified you need to have processes that are certified so on our side it means being suck to type two audited by your tier one institutions having the iso 27001 framework in place as well because when you're doing that you're spinning up the due diligence of your clients so they can K click box pretty much and then send all that to their to their Regulators so that first part of auditability which goes through I would say security and operational certifications framework second having access to all the pentests and the and the audits the code aits we do so go one layer below the technology is very important right U and three three uh once you've enable a client to actually do his due diligence you need to enable them to be compliant by Design and what it means is that a tech custodian is not just a technology that is helping you checking box it's also helping you implement the actual framework for instance if you need to provide Caesar capability well you need to have a technology that will enable you to see the wallet if you need to have segregated wallets because your regulator is asking you to segregate all the phones of your clients then you need to have a solution that will enable you to perfectly segregate private keys from each single client right so there's a lot of features from a tech standpoint that then we need to implement in order to enable our clients to both from operational um auditability but also technical uh point of view be be actually uh uh uh compliant and and and implement the the the the framework they need now from Al a business standpoint when you're talking and working with trading firms and you just talked about operability when you think of a wallet a wallet is not just a place where you safekeep your assets it's also a place that enables you to transact from one venue to another like you always need your wallet to uh for instance trade uh in uh in uh in defi to stake your assets the wallet is really much a distribution service and this is how we see ourselves we need to be as open as possible and make all the Integrations possible so our clients can build their businesses and actually start making money on top others right so for instance we've also built an integration with with Babylon which was actually something that was quite hard to do in the beginning right because you needed to support at the cryptographic level tap route in order to enable staking with Babylon so this is something that we've done in order to enable our clients to stake in a self- custodial way with our service but then after the detail I would say devil is in the details right because not all Integrations are equal and while you working with a trading platform and with large financial institutions that are actually trading you need also to enable them to make sure that they know what they sign this industry is operating a lot on what we're calling row or row signing which pretty much have a consequence that everything you sign is blind right you don't know what you're saying which can have consequences that are disastrous financial institutions cannot operate this way compliance officers need to be able to actually check that at a moment when you sign a transaction the the smart cont was decoded and you actually know what you sign so there's a lot of details along the way when you're working with trading platforms where from a technology standpoint what we need to do is enable enable in a secure way all the bridges so our clients can build business and profit business on top of it thank you very much well given that we have 5 minutes left i' like to offer speaker uh panelist for the last comments and remarks for the audience gathered here probably people from uh Enterprises institutions Banks as well as retail who are interested and thinking about like what's the future road map Cal Solutions maybe you go first this time maybe change the order this time not always start from uh quick last comments remarks to the audience I go um last comments to the audience yeah I think when when it goes back to you know thinking and picking the solution and your and your provider uh when starting transacting in in the digital asset space first build a risk assessment when you have your risk assessment know exactly what your use case and pick the solution that enable you to be actually scalable with your use case we've seen too many um players that went for the easy solution first and the quick you know the Quick Way in uh crypto and then had to rebuild everything because this was not production ready for their specific constraints so it's it's actually a very important piece of your digital asset stack and this is pretty much going to be a a um the tech custody and the and your custodian is going to be actually a partner that will enable you to increase your business or completely be a blocker so so I think it's super important to take a step back and really spend some time in doing the due diligence for instance something that you may not know is that in our industry no one actually uh uh has been uh ISO certified for business continuity which is something that almost doesn't make sense so my my my take always when I look at Tech custody solution and and when we were thinking about how to deploy your road map right on on our space it's to make sure that we don't reinvent the wheel there are Frameworks that work in web 2 there are Frameworks that work with fin institutions and we need to adapt to them I'll be quick and conscious of time I see the clock ticking but uh just um more than speaking more about codyy an invite to institutional players when they have to get into the space into physical digital assets just go to U the backbone of the regulated structure which is the regula custodian and this this country on top is a set for a unique opportunity we have regulatory framework on financial institution and Regulatory framework on VPS so financial institutions here have the unique opportunity to access to digital Assets in their physical form and also to stable coins which is something that we have not spoke about of course but there is a specific framework pushed by the central bank here so I believe this this country is going to be certainly a hub for stable coins which is something very interesting and has connections to the def space and many other projects everything from me thank you yeah sure and to me I believe 2025 will be a very important year for both the crypto world and the non-crypto world because as Bitcoin become M uh more and more appreciated by non- crypto world we will see a trend where non crypto world and crypto world will become more more united and um emerge together so custodes will be the first line of defense for people who enter the crypto world so custodes will play a critical role of the success of the crypto industry in 2025 well I really love your last comment the last line of defense for it will self defense well thank you everyone for participating in this panel and thank you everyone for listening to us uh please give a round big round of applause for our panelists and please enjoy the rest of the day thank you [Music]