Crypto Custody Tech Firm Fireblocks Seeks New York-Regulated Trust Company

The firm also convening a crypto custodian partner program with a starting line up of companies from the U.S., the United Arab Emirates, Britain, Singapore, Thailand and Australia.

AccessTimeIconMay 10, 2024 at 4:00 p.m. UTC
Updated May 11, 2024 at 1:43 a.m. UTC
  • Pending final regulatory approval from the NYDFS, the Fireblocks Trust Company will offer cold storage custody to U.S. clients.
  • Fireblocks' Global Custodian Partner Program will launch this quarter with an initial group of licensed firms based in the U.S., the United Arab Emirates, Britain, Singapore, Thailand and Australia.
  • Candy Digital Co-Founder on Building the Rails for Future Digital Engagement
    00:58
    Candy Digital Co-Founder on Building the Rails for Future Digital Engagement
  • U.S. House Fails to Overturn Biden’s Veto; Staked Ether Close to All-Time High
    02:00
    U.S. House Fails to Overturn Biden’s Veto; Staked Ether Close to All-Time High
  • U.S. Spot Bitcoin ETF Flows Drop in Q2: Kaiko
    00:47
    U.S. Spot Bitcoin ETF Flows Drop in Q2: Kaiko
  • What's the Biggest Problem With Play-to-Earn Model?
    00:47
    What's the Biggest Problem With Play-to-Earn Model?
  • Cryptocurrency safekeeping specialist Fireblocks plans to establish a limited-purpose trust company under the purview of the New York Department of Financial Services (NYDFS). Pending final regulatory approval, the Fireblocks Trust Company will offer cold-storage custody to U.S. clients, the firm said on Friday.

    The New York-based company is also creating a network of licensed custodians, the Global Custodian Partner Program, which will launch this quarter with an initial group of companies based in the U.S., the United Arab Emirates, Britain, Singapore, Thailand and Australia.

    Crypto custody is evolving in a post-FTX world, where new key-sharing technologies like multiparty computation (MPC), which Fireblocks has championed, have been embraced by institutions looking for flexible ways to reduce counterparty risk. After the thousands of FTX customers found their assets were marooned when the crypto exchange collapsed, there's been a shift toward self-custody, including a greater reliance of risk-mitigating technologies like MPC.

    Fireblocks, which has been purely a software vendor until now, has recognized some clients might need a custodian for regulatory or risk reasons. That said, Fireblocks SVP of partnerships Adam Levine stressed the firm remains committed to innovating with self-custody.

    "We continue to believe everything we've said about the importance of holding your own assets and at no point are we walking that back," Levine said in an interview. "But what's becoming abundantly clear is that there's a lack of qualified custodians in the United States that are able to focus on digital assets."

    There is a political context to this. In February of last year, proposed changes to the custody rule by the Securities and Exchange Commission (SEC) would, in theory, dramatically narrow the types of institutions that registered investment advisers (RIAs) could put their customers' crypto into. Part of a divisive and yet to be finalized set of changes known as SAB 12, only firms such as registered broker-dealers and federally chartered banks would qualify, which is at odds with the current state licensing system.

    "Our position is not to poke at any regulator, any political party, or the government," Levine said. "We're just applying the existing rules and existing framework. We know there's a business need based on clients, based on the market opportunity. We understand what the current regulatory framework is, and SAB 121, as it is, in the current view of federal regulators and state regulators. We believe that pursuing the trust license in becoming a qualified custodian was the right approach."

    In terms of the custodian partner program, this will include licensed custodians using Fireblocks' technology, and the firm is talking to at least two or more providers in each of the jurisdictions mentioned, said Levine. The trust company, which is expected to be live in the next few months, will be the initial U.S. qualified custodian in the partner program, but more are expected to follow, he said.

    Fireblocks Trust Co.'s articles of organization were filed with NYDFS on May 3, according to a notice on the regulator's website.

    UPDATE (May 11, 01:40 UTC): Adds sentence about NYDFS filing at bottom; changes "unveils" to "seeks" in headline.

    Edited by Sheldon Reback and Marc Hochstein.

    Disclosure

    Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

    CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

    Ian Allison

    Ian Allison is an award-winning senior reporter at CoinDesk. He holds ETH.