Cryptotech company Fireblocks is preparing to launch a new platform that will help traditional financial companies protect themselves from FTX-like failures.
The company, whose clients include BNY Mellon and BNP Paribas, said the “off-exchange” product would act as an intermediary, allowing companies to store crypto assets while they trade. Assets are only moved for post-trade settlement.
Stephen Richardson, Fireblocks' senior vice president of financial markets, gave a first-hand preview to potential customers at an event in London on February 13th. financial news.
“Our customers no longer want to leave their assets on exchanges,” he said.
The product “minimizes the risks associated with exchanges by keeping assets within our own infrastructure,” he added.
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When Sam Bankman Fried's FTX empire went bankrupt in November, crypto companies like Galaxy Digital and Genesis were left scrambling to salvage assets left behind on the exchange.
BlackRock and Sequoia Capital were forced to write down hundreds of millions of pounds worth of investments in the company itself.
This saga has forced traditional financial companies to change their approach to crypto investing.
Speaking at the same event, Duncan Trenholm, co-head of digital assets at TP ICAP, said there was a growing demand to separate roles such as crypto custody and trade execution.
It was “part” of the traditional market, he said.
“You don't want to keep your funds at the execution site, because if there's a problem with the execution site, you're going to lose your funds.”
As a result, some companies have stopped trading in cryptocurrencies and are “suddenly going through internal processes from a compliance, legal, and risk perspective that say, 'What were you doing before?'” added.
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Trenholm added that other firms are “balancing their focus on asset classes with the risks they are willing to take.”
New York-based Fireblocks develops technology that works around customers' cryptocurrency wallets, including storage, transfer, and payment platforms, but does not trade or hold assets on their behalf. .
A $550 million funding round gave it a valuation of $8 billion, making it the world's most valuable crypto infrastructure company in early 2022. Since then, Fireblocks has more than doubled its workforce to about 600 people.
Fidelity Digital Assets already offers similar off-exchange services. Clients can trade on the TP ICAP exchange Fusion Digital Assets while their assets are held at Fidelity.
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Cryptocurrency custodian Copper, chaired by former British Prime Minister Sir Philip Hammond, offers a similar service.
Fireblocks has signed on Hong Kong-based exchange Huobi and crypto futures exchange Deribit as partners in the plan.
“Trust in centralized exchanges is at an all-time low, so exchanges are looking for mechanisms to restore trust around trading volumes and interactions with exchanges,” Richardson said. [block]chain. “
The product won't “completely eliminate counterparty risk,” he added, but will “bring systems back to customers that typically reside in centralized organizations.”
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