Jack McDonald on Standard Custody's institutional platform

0:20custody of those funds which has really grown throughout 2021 i'm really interested in your take on it but first of all i would love if you could give a high level overview and the focus of standard custody that's great well thanks again for the opportunity center custody is a digital asset custodian we're focused on serving institutions to provide custody and escrow services

0:43for a broad range of digital assets so not just cryptocurrencies but other traditional assets that over time will be digitized or tokenized we're unique in the space and that we're the only cryptocustodian or digital asset custodian with a blockchain at our core so we'll talk a little bit about that we're regulated by the new york department of financial services so we

1:03join a very elite group of select firms who actually have that regulatory banner and we also have insurance through marsh and are really excited to be launching the product that is very exciting jack and it's great to bridge that gap between the crypto and traditional markets you know it seems so far in the latter half of 2020 and throughout 2021

1:28Institutional custody has become very important and there's a lot of institutional capital that's flowing into these digital asset markets can you talk a little bit about how standard custody is positioning the company to bridge that gap from traditional investors into the crypto markets absolutely and i think part of it a large part of it is

1:50you can see exemplified through our recent partnership that we announced with cowan but before that you also touched on the fact that you know we've got both traditional and crypto and blockchain dna in our organization our founder is arthur britto who is one of the three co-founders of ripple we also have david schwartz who's the current cto and chief cryptographer at

2:11ripple who is on our board and an investor and an advisor so we feel like we've got real resident expertise in blockchain and cryptography and on the traditional capital market side that's where my background is our vice chairman used to be the vice chairman of b and y melon tim keaney responsible for all asset servicing so we're really approaching this opportunity from both a digital

2:34asset crypto blockchain perspective but also a firm understanding of how traditional capital markets work because we have a view that there's going to evolve over time a real merging of these two different ecosystems we preach evolution not revolution so it will take time and we're starting to see some really meaningful examples of organizations traditional

2:56organizations who have an interest in the digital asset ecosystem and want to partner a perfect example is cowan who just led our series b round which we announced a couple of weeks ago we've closed a 60 million dollar round they were the lead investor in that and it was really i think due in large part to them wanting to have a lynchpin

3:18for collins digital asset strategy that they're in the process of formulating and had a firm belief that custody would really be at the core of that they want to take their whole capital markets business and basically re-platform it to support digital assets and so by leveraging our custody business they can take their traditional trading lending margin financing and prime

3:40brokerage businesses and really layer it on top of a regulated and insured digital asset custodian so they're one example of a sell side firm i think they'll frankly be the first investment bank on wall street going to market with a holistic buy hold custody and fully service that asset they'll be the first on wall street doing that which is really exciting

4:02we also have a partnership with blockchain.com another one of our investors who's looking to build out an asset management business they're obviously as the name implies and i don't know how well you know but they've been around for a long time one of the largest bitcoin exchanges they're looking to build out more of a traditional asset management business

4:20Leveraging digital assets and we hope to partner with them and then i would say finally we're we're seeing an enormous amount of interest from traditional hedge funds family offices and banks frankly who are looking to transform their current offering to get into digital assets but wanting to do it through trusted partnerships and wanting to do it

4:42through regulated entities and so coming from a background of traditional capital markets partnering with folks like cowan we're finding that there is the ability to take interest in varying degrees that's been there but to really accelerate the adoption by being able to do that with counterparties that they know and counterparties who understand their core

5:02business definitely jack those are all great points and having the round led by cowan and having this traditional markets experience i think is a huge factor and i'm curious because there are quite a few institutional custody players in the markets now especially with this increased demand is the trust factor one of those major factors for

5:28traditional investors that you know or family offices that have a lot of capital and they're looking to choose an institutional custody market for digital assets what are those factors that you see them prioritizing and how are you prioritizing those into standard custody to ensure that you are the leading choice for those institutional investors

5:51i think you hit on a lot of the really key decision making ingredients for institutions coming in particularly as they're wading into a new space here and trust ironically because in many cases what we're actually developing here is a trustless society replacing trust with truth by leveraging our blockchain but from a counterparty standpoint

6:12trust is key and we want to be a trusted counterparty to the institutions who are investing in the space the way we do that i think is through the team we have the leaders we have we have you know deep relationships and history in traditional capital markets so that's certainly helpful in terms of instilling trust having a brand that is regulated

6:38by the new york regulator really the highest regulator in the land on a state-by-state basis is very critical getting insurance through a brand name like marsh again these are all institutional foundational building blocks that traditional capital markets use to gain comfort and to instill comfort with the board of asset managers or the investors and so we want to replicate

7:00many of those today when you dig a layer deeper in terms of our actual offering having a blockchain at our core also we think really separates our offering from the balance of other competitors that are out there as i mentioned earlier we're the only digital asset custodian with the blockchain at our core and what that allows us to do is to have

7:20an immutable record of every step of the transaction keeping the identity of each participant at a firm who is either initiating or approving a transaction right through to the ultimate transfer of the asset if it leaves our vault to go to an exchange to sell for example or move somewhere else and so being able to provide that audit trail is another component

7:43of trust that is driving people frankly to our platform and getting comfort not only with the operational folks who who are oftentimes making you know a key part of the decision at these asset managers but also very importantly instilling confidence and trust from the leadership team and ultimately the investors i think that's a great point jack

8:05and also instilling confidence and trust in the new york regulators and you mentioned a couple times about how standard custody won one of the crypto licenses from the department of financial services in new york and i've heard that those licenses are pretty hard to get and it's not they're not just handed out like cookies can you talk about

8:26they wish they were not well yeah i wish they were they would have saved me a lot of money and a lot of time but we were deliberate we wanted to be a qualified custodian for individual for institutions rather and in the us the only way to become a qualified custodian is to either be a broker dealer regulated by finra and finra has not been giving out

8:45those licenses you can be a futures an fcm which is regulated by the cftc commodities future trading commission and they have only awarded licenses as the name implies for entities that want to trade futures so if your business was just around bitcoin futures or commodity futures that's applicable but for the sort of business that we're running the only

9:07real alternative was to go on a state-by-state basis and there's a less than a handful of states that actually award charters for digital assets south dakota wyoming nevada and you know we felt like new york being the most stringent certainly from a capital requirement standpoint the most stringent from a onboarding and other sorts of policies procedures

9:29cyber etc we felt like the effort and the resources that we would have to dedicate in the time to get that license would ultimately work to our benefit as institutions kind of surveyed the opportunities and the options that exist in the landscape and that's certainly been the reaction that we've been getting since launching the business that's great and now with that

9:51fundraising closed through cow in the 60 million dollars that you mentioned in the series b can you talk about that being closed and the next steps that you're going to take in the markets as you continue to grow with that fundraising closed sure we're we're in serious growth mode right now so hiring lots of engineers we've been on a roll there we're also

10:12building out the client success team and the sales team adding people to our compliance efforts so all of the requisite human capital that we need to really grow the business we also think about non-us expansion so part of the use of proceeds we'll be going to build out teams in europe and asia and we also have some bigger ideas around settlement

10:34That would be cross asset class and cross chain really to build an interoperable settlement layer that we are in some proof of concepts right now that will direct some of the funding that we raised towards further building out those initiatives that's great to hear and now in terms of the actual product you mentioned a bunch of strategic partnerships that you have

10:56and i was reading on how you're really focused on enabling institutional investors to seamlessly access and leverage crypto in their portfolios can you talk about those steps and how easy you're actually making it for those investors to get their funds into the digital assets sure i mean the standalone custody product itself is very easy to work with we onboard

11:20clients we go through a rigorous vetting policy and process around aml kyc etc all that has been pre-approved by the dfs once clients are approved and we bring them on board in terms of putting them through some of the training that's required to use our products biometric videos being taken etc once clients are on board our product is quite easy to use

11:47in terms of transferring assets in and out of the wallet we are in the process also of linking strategically to cowan who will be handling at least in the early days all of the trading and asset servicing so lending borrowing etc that would allow clients really a one-stop shop in terms of not only customing and holding secure their assets but the extent that they want to

12:10buy sell borrow lend their assets for yield there will be certain protocols that we support that provide staking or other sort of defy opportunities and we fully plan on being a full-service defy supportive participant from our custody and escrow operations it really depends ashton about what type of product or service you're looking for whether we would be doing

12:36that natively within standard custody or through partnerships with folks like stan like like cowan that's great to hear and i was just going to ask you about staking defy and you know storing even these major assets like bitcoin and ethereum in cold storage now with a lot of these products moving to proof of stake or having staking abilities for stable coins or these major assets

13:01that seems like something that would be pretty attractive to institutional investors that have a lot of capital it's very attractive you want to fully service the assets that you have and take full advantage of them and so staking is a perfect example of where you can get yield on the assets that you have and so the i think the attributes of what

13:19traditional cold storage can offer are quickly evolving with the whole advent of d5 coming in and also the technology that is used to support traditional cold storage is also changing i think one of the benefits of entering the market now is that we've taken advantage of a lot of the technical innovations that have come into the market over the last two or three years

13:40so relative to some of the custodians have been around a little bit longer we're quite confident and excited about the technology stack that we have we firmly believe that it affords us a lot greater opportunity to be flexible in terms of supporting institutions and owners of assets of how they want to service those assets the sort of integration points that we can do all

14:00backed by a blockchain that can can securely store each one of those different events memorialize them on our chain and also from a regulatory compliance standpoint be able to offer a much greater platform to gain comfort and trust from all the different participants on both the buy and the sell side that we interact with definitely and you mentioned cold

14:21storage there a couple times and i was reading with standard custody that they were toting that the funds are safer than cold storage and i'm curious if you could elaborate on that none of the other custodians have a blockchain at the core and by having a blockchain we're able to run business logic that we've developed as well as our own proprietary multi-party computing or mpc

14:45stored in the blockchain but running that through our hsms or hardware security modules so through that dynamic and that intersection between those different technologies we're actually able to offer a more robust security shield and again as i mentioned earlier being able to provide an immutable record of every step of every transaction that can never

15:05be altered the identity secured for every participant in our custody and escrow product we believe at a whole different layer of security than than exists with anyone else all at the same time being able to provide a great deal of flexibility and ease of use because the most secure platforms can exist but what good are they if you can't access

15:30the asset and so that's walking that fine line which many in the industry are trying to develop around how you keep assets very secure but also making them accessible we feel like we crack the code in a very innovative and demonstrable way there definitely and you with in integrating defy staking and looking for other future trends in the market and new ways to utilize

15:57their assets that are going to be on standard custody i'm guessing that you're also just looking at the industry as a whole and what trends and what would be best to implement as new kind of products into the platform can you talk about the trends in the industry what you see and what you're most excited about as the digital asset space just continues to grow throughout the next

16:18couple years sure i'd say there's three big trends that i'm excited about i'm certainly excited about d5 and all that represents we very much are a mission-driven company and we believe in the democratization of finance and so defy very much dovetails into that thesis i'm also incredibly excited and really feel very affirmed in our thesis around institutional adoption and how

16:45institutions will want to do business with trusted counterparties and we're seeing that through some of the partnerships we have a lot of people have been waiting for institutional adoption to increase it's been a good last 12 months i think in terms of that as different buy side entities and corporates have come in and announced their investments specifically into

17:03bitcoin but the broader ecosystem i think is benefited from institutional adoption but we have a slightly different take on it and it's going to market through trusted partnerships in heavily regulated entities we think is going to be a real differentiator the third trend that is nascent but it is happening quietly is the broader digitization or tokenization of traditional assets

17:25and we think that is just a massive greenfield opportunity frankly is far greater than just the cryptocurrency or virtual currency market where you can think about all of the inefficiencies that exist in capital markets globally think about assets and we can start with some of the more illiquid or opaque asset classes like real estate and venture capital private company shares etc and

17:47being able to help re-platform the financial system to really make that whole wealth transfer more efficient we think is really really exciting we've got some interesting pocs going on right now in europe with some large asset owners and asset servicing firms and we expect to do more of those and really help pave the way for a better more efficient more cost

18:09effective and ultimately more secure capital markets business globally and that's really really exciting very exciting jack and tokenizing real estate and just the capital markets overall you know compared to what the digital asset space is right now it's just a speck of dust we're still so early on so getting in right now is you know you're at the forefront of

18:31innovation still even though we're a few years in compared to the size of what this is potentially going to grow to in the coming years and decades it's very exciting so for the viewers that are looking to learn more about standard custody potentially get involved what is the best way for them to learn more best way we're rolling out a new website in the next week or so but

18:53standardcusty.com you can take a look there and just contact us through through that website and we'll happily get in touch with you give you a demo of our product and talk to you about how we can help you secure your assets and better assets better service those assets going forward sounds great jack i will leave those links in the description box below as

19:11well all the best moving forward with standard custody and let's follow up in the near future sounds great thanks for having me ashton you