Announced Tuesday, METACO and Cobalt are launching a software-as-a-service (SaaS) offering that covers the full gamut of institutional trading requirements for digital assets. In short, it brings a combination of bank-grade custody and post-trade settlement to crypto.
“There is very little institutional-grade infrastructure within digital. In fact, I’m gobsmacked at how little there is,” said Cobalt Chairman Adrian Patten. “Also, I’ve noticed that in the crypto world everyone concentrates on the coin, the crypto bit. They forget the dollar. Whether that’s from a risk management perspective, management of collateral or settlement, that’s always the thing that holds them back.”
Specifically, the partnership involves integrating METACO’s institutional operating system for digital assets, SILO, with Cobalt’s interoperable FX and digital assets platform to offer a fully integrated end-to-end SaaS solution for the storage, limit allocation and intraday settlement of digital assets, per a press release.
“There’s a lot of friction in the market still,” said Seamus Donoghue, VP of sales and business development at METACO. “When you trade on exchanges or with counterparts in general, you have to pre-fund those positions. That’s capital intensive. There’s a counterparty risk there as well, and it’s just not a very efficient market.”
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Between them the two firms have a hand in most of the major crypto banking plays happening in Europe right now. METACO is working on crypto custody with Standard Chartered, BBVA, DBS Bank and Gazprombank Switzerland. Cobalt is also involved with Standard Chartered and has other projects in the pipeline involving the likes of ErisX and LMAX Digital.
Cobalt’s Patten pointed out that banks and many regulated buy-side firms need certain processes and ways of doing things. “You can’t go settling a transaction on the back of emails. Which is what happens,” he said.
But it’s not just institutions looking for better digital asset trading infrastructure. Many of the largest crypto exchanges are in talks with the firms too, Patten said.
“Over 75% of our pipeline is crypto firms looking to upgrade their processes,” Patten said. “They’re having massive increases of volume and volatility, and they realize you can’t carry on doing it in this way. We’re going to be signing a bunch of these firms up in the first quarter.”