Zodia Custody, the cryptocurrency storage offering backed by Standard Chartered and Northern Trust, has released an identity toolset that can help institutions easily prove ownership of crypto held in custodial wallets.
Zodia’s “proof of ownership” system cryptographically embeds the identity of an owner of a private key of a wallet, ensuring a third party can validate the key. It allows each account to be independently validated and linked back to its owner quickly, for instance in the event of an audit or even in the case of a custodian going bankrupt, the company said in an announcement on Tuesday.
For institutional clients, proving ownership of crypto assets held by a custodian is rather more involved than with self-custody – where a user can simply send a small amount of coins from an address or use MetaMask to sign messages with a private key.
Having a clear and demonstrable way of independently validating an account and quickly linking it back to its owner in a situation is a desirable outcome for institutional investors in the wake of ugly situations like the failure of Celsius Network.
“Coming from the traditional banking industry, we understand the risk, we understand regulation, and we also understand bankruptcy laws,” said Zodia Custody Chief Technology Officer Thierry Janaudy in an interview. “So we are able to give that extra comfort should something like that happen. The customer should be able to go to court with those proofs and prove to an external auditor how much they have on-chain at any point in time,” Janaudy added.
Zodia’s patent-pending custodial ownership system, which is now in live production, actually involves three different proofs, Janaudy explained. It comprises proof of ownership from a customer point of view, proof of management of the wallet from a crypto-asset service provider’s (CASP) point of view, and proof of authority as delegation of private key management from the customer to the CASP, he said.
“We still use the same HSMs [hardware security modules] to secure the digital assets in Zodia and everything relies on standards that are permitted cryptographic digital signatures,” Janaudy said.
Read more: BNY Mellon Starts Crypto Custody Service
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