Digital asset custody firm Trustology has cut seven staffers, including three executives, as the big banks and institutional players that were its target market are taking longer than expected to jump into the crypto space.  

The firm, which now has a headcount of 11, has changed focus and is now courting crypto hedge funds and exchanges as well as the nascent decentralized finance space.

“Unfortunately we had to let go of seven individuals - three executives and four developers,” said Alex Batlin, CEO and founder of Trustology. “We needed to restructure, we needed to downsize.” 

The move is another sign of belt-tightening in the blockchain industry following the crash in cryptocurrency prices of early 2018. It follows recent news that Trustology backer ConsenSys has been forced to cut its operations in India and the Philippines.

Almost exactly a year ago, Trustology raised $8 million in seed funding from ConsenSys and Two Sigma Ventures, the VC arm of the technology-focused quant fund. 

Trustology started out with a vision to build an enterprise-grade custody technology to secure crypto assets on behalf of banks and institutional clients. Over the past year, there’s been lots of engagement with banks, said former UBS banker Batlin. (The Trustology founding team also comprises ex-bankers from Bank of America, RBS, Goldman Sachs and Barclays). 

However, this year’s Sibos banking conference, which took place in London in September, turned out to be a watershed moment, said Batlin.

“I talked to most of the folks that I'd expect to be doing something - all the top tier banks - and had great conversations, but one of the things I was able to take away from it: there wasn't a provisioning of budget in the coming fiscal year dedicated to production rollout of custodial services,” he said. 

Batlin blamed this in part on the crypto winter, or industry downturn following the 2017 boom, which reduced buy-side demand from institutional hedge funds, and also the general fact that many banks are now planning for a recession of some degree and looking out for undue costs.  

“It's still not something that they are prioritizing for the next year,” said Batlin. “What we decided was, this will take longer than originally anticipated back in 2017. Very simply, we needed to have a longer runway,” he said.

There are still signs of bank interest in crypto custody, such as a report this week from Reuters, citing unnamed sources, that Dutch lender ING was developing storage tech for digital assets.

Batlin said staying in a long game was part of startup life which is something his investors understand. 

“One of the reasons I partnered with ConsenSys as an investor is because Joe [Lubin] has got a remarkably long term vision,” he said.