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Institutional investors in Asia are increasingly turning to third-party custody service providers to navigate the complexities of the $1.2 trillion digital asset market, pointing to the limitations of self-custodial solutions.

There is a growing demand for institutional-grade custody solutions among family offices, high-net-worth individuals and external asset managers in safeguarding their digital asset holdings and exploring new investment opportunities, according to a joint report released by the digital asset wealth platform Aspen Digital and “big four” global accounting firm PwC today.

Self-custody solutions offer users complete control over their digital assets but they are solely responsible for managing their own private keys to secure them. Given this challenge and concerns over hacks, the report indicates an institutional preference for third-party custody providers due to their specialized capabilities and expertise.

“More institutional investors are recognizing the limitations of self-custodial solutions for their ongoing trading and operational needs. Instead, many institutions prefer third-party custody service providers,” Aspen Digital said in a statement.

Over 120 custody providers, including Citigroup and Deutsche Bank, are now operating in the space as of April 2023, according to Blockdata.

Expanding role of digital asset custodians

In its 2022 metaverse survey, PwC found that 82% of U.S. executives expected to integrate web3 into their operations within three years. However, in this latest report, most NFT self-custody solutions were also found to pose a challenge for institutional investors.

Digital asset custodians are, therefore, evolving beyond their traditional role of safeguarding cryptocurrencies to assist investors in navigating emerging asset classes such as DeFi, NFTs and the metaverse, Aspen Digital said.

“Safekeeping of assets and ensuring they are segregated from client service providers’ own (house) assets is a fundamental need,” PwC digital assets and web3 co-lead Duncan Fitzgerald said in the statement. “This has applied for many years in the traditional securities industry — so I am pleased to see that there are credible options available now in the digital assets ecosystem.”

“For institutional investors looking to allocate into digital assets, understanding the unique characteristics of custody solutions and providers compared with traditional assets is one of the biggest impediments when considering investment,” Aspen Digital CEO Elliot Andrews added. “Implementing the right digital asset custody solution is crucial for successful investment opportunities and to avoid significant asset losses.” 

Hesitation in adopting custodial solutions

Although institutional-grade digital asset custody solutions are in demand, concerns remain regarding asset security, fragmented regulations and comprehensive insurance coverage, Aspen Digital said. “Digital asset custodians are addressing security risks through advanced technologies such as multi-party computation, keeping up with evolving regulations and meeting investors’ expectations for insurance coverage across different types of digital assets,” it added.

The report comes at a time of increased optimism surrounding the prospect of a spot bitcoin ETF in the United States, following the renewed race kicked off by BlackRock on June 15, with Coinbase listed as the custodian. If a spot bitcoin ETF application is approved by the Securities and Exchange Commission, it would provide another avenue for institutional investors to gain exposure to bitcoin without custodying the underlying asset themselves.

Last month, another PwC survey found more hedge funds investing in crypto, despite recent volatility.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Vijay Chetty has joined the web3 rollup provider Eclipse as Chief Business Officer.

Chetty is the former Head of Business Development for the teams behind Uniswap and dYdX, both decentralized exchanges. In his new role at Eclipse, Chetty will scale Eclipse and help accelerate rollup adoption more broadly in the crypto industry.

“We’re beyond excited to welcome Vijay to the Eclipse team,” Eclipse CEO Neel Somani said in a statement. “Given Vijay’s proven track record launching and scaling dYdX and Uniswap, he navigated the exact challenges that Eclipse solves. This marks the expansion of Eclipse’s DeFi offering in addition to the suite of growing use cases powered by our cross-ecosystem infrastructure.”

Eclipse provides scalable, customizable blockchains called “rollups” that can be tooled for a project’s specific needs, such as DeFi or gaming. Rollups are built on-top of a Layer 1 blockchain such as Ethereum to process transactions more quickly.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Developer Florida Street’s seed round features Hack.vc, Foundation Capital, Dragonfly Capital, Pantera Capital, 6th Man Ventures and others.

Axelar said further plans with Microsoft include connecting private and public blockchains that use OpenAI services to create Web3 products.

Microsoft and Axelar, a crypto interoperability project, have entered into a partnership to offer blockchain interoperability solutions.

As part of the deal, Axelar’s blockchain interoperability solutions will be made available to Microsoft’s customers through the Azure cloud marketplace. The move is intended to make blockchain onramps more accessible for both web3 and enterprise developers.

Specifically, Microsoft Azure Marketplace will offer Axelar’s General Message Passing cross-chain software stack that can enable developers to integrate apps on different blockchains. Included in the offering are developer tools such as AxelarJS software development kit, which automates multi-chain deployments.

Axelar is a blockchain project that promises to enable secure communication across various chains. It accomplishes this through a programmable interoperability layer on the Cosmos network, which serves as a bridge connecting apps on different blockchains.

“We are excited to collaborate with Axelar to accelerate blockchain integration and deliver valuable solutions to our customers,” Daniel An, director of business development at Microsoft’s Web3 & AI division, said in a statement. “By leveraging our strengths and expertise, we can empower organizations to embrace blockchain technology and transform their operations.”

Axelar and OpenAI on Azure

The two companies have agreed to explore the development of solutions that include connecting private and public blockchains, and leveraging and integrating with Microsoft-offered OpenAI services on Azure.

“The shared vision inspired us to partner with Microsoft to provide an extensible interoperability layer for the Azure community, from fast-growing Web3 startups to global enterprises,” said Axelar co-founder Sergey Gorbunov. “With Microsoft, we are now also able to explore new frontiers in Web3, such as blockchain-enabled OpenAI services and the integration of AI in future Web3 applications.”

It’s not uncommon for Microsoft to partner with crypto projects to offer their services on its cloud platform. In February, the tech giant collaborated with Ankr to offer enterprise users blockchain remote call procedure solutions.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The latest price moves in bitcoin (BTC) and crypto markets in context for July 11, 2023. First Mover is CoinDesk’s daily newsletter that contextualizes the latest actions in the crypto markets.

Blockchain development firm ConsenSys has released its highly anticipated Linea on the mainnet. The alpha release of its zkEVM rollup will onboard its testnet partners this week as they prepare to open the network to the public during the Ethereum conference EthCC.

Linea is a Layer 2 chain that leverages ZK-Rollups for scaling and is compatible with Ethereum apps.

This launch comes after a successful testnet phase where Linea received significant attention from users, becoming one of the largest active projects on Goerli. During this phase, an impressive 5.2 million unique wallets participated, executing over 41 million transactions within just three months, according to data provided by the team.

ConsenSys said Linea aims to offer a cost-effective solution for Ethereum application developers and users alike, with transaction costs up to 15 times cheaper than Ethereum Layer 1.

Linea’s zkEVM is fully compatible with Ethereum Virtual Machine (EVM) bytecode and integrates easily with existing developer tools on Ethereum.

ConsenSys-owned self-custody web3 wallet MetaMask and other developer tools like Infura, Diligence and Hyperledger Besu will operate with the network.

“The next chapter of web3 will be written on Ethereum L2s, and Linea is poised to become a major trusted L2 execution environment for scalable dApps,” said Joe Lubin, founder and CEO of ConsenSys.

© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The rollup chain from ConsenSys, known as a zkEVM, joins a growing field of projects aiming to expand access to Ethereum using zero-knowledge cryptography.

“The dollar index futures act a robust complement to the long-only portfolio from both a thematic and empirical perspective,” Marex’s Mark Arasaratnam said.

GHO has been in the works for over a year and was issued on a testnet earlier this year.