Fintech CEO: Kevin O’Leary’s Move Towards Crypto Raises Custody Questions

  • Cryptocurrencies
  • 26.11.2021 12:30 pm

Kevin O’Leary, notable for his role on Shark Tank, has made an about-face on digital assets. Originally a skeptic, the businessman has, this month, announced that nearly 10% of his portfolio is now invested in digital assets. O’Leary isn’t the only famous businessman to espouse the benefits of cryptocurrencies. Mark Cuban and Elon Musk, in particular, have long been cheerleaders for the new investment class.

“What’s interesting about celebrity business leaders embracing crypto is that they’re moving digital assets further into the mainstream just as central banks are planning to launch digital assets of their own. At the same time, institutional investors are also coming on board. The culmination of these events mean that the industry is desperately in need of custody services which are up to the task of keeping these new investors safe. Digital assets are different from traditional assets in a way which requires more from custody providers,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.

“Because of their digital nature, cryptocurrencies are more likely to be the target of hackers and other bad actors. That means that custody providers are charged with the increasingly important job of actually safeguarding those assets. In a digital world, custody is more than an administrative function. Now, it is a security function,” noted Gardner.

Mordor Intelligence Report on Digital Asset Management noted, “The digital asset management market was valued at USD 2,962.2 million in 2020, and it is expected to reach USD 8,158.6 million by 2026, registering a CAGR of 18.46% during the period of 2021-2026.”

“What that means is that institutional investors are buying in, lock, stock, and barrel. That also means that there’s more value in the holdings of digital assets. The more valuable the asset, the greater the target for bad actors,” said Gardner. A 2020 Deloitte report, citing Coindesk, notes that there has been "a 13-fold increase in the amount stolen from cryptocurrency exchanges between 2017 and 2018, a figure that stands at almost US$ 2.7 m per day."

“Cryptocurrency exchanges need custody services to keep their assets more secure. Institutional investors definitely need to secure their assets. However, right now, many of the leading custody providers have major security issues. One, in particular, is in the midst of a lawsuit which alleges it is responsible for more than $70 million worth of losses. The entire point of utilizing a custody service is for investors to know that their assets are safe until they wish to move them. A loss valued at $70 million doesn’t exactly scream safe haven,” opined Gardner.

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Modulus has provided its exchange solution to some of the industry’s most profitable digital asset exchanges, including a well-known multi-billion-dollar cryptocurrency exchange. Over the past twenty years, the company has built technology for the world’s most notable institutions, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.

“The industry has some soul searching to do. Without custody, the cryptocurrency segment can’t expand. With the existing options in the space, it is hard to see institutional investors feeling secure, especially as more and more of their clients begin to dip their toe in the crypto pool. In order for digital assets to truly flourish, there needs to be a major realization, along with an industry realignment, among custody providers that their clients demand more from them,” noted Gardner.

Related News