Storing cryptocurrencies is becoming more competitive and profitable every day. The latest announcement was made in Switzerland, where local family bank Maerki Baumann announced on May 29 that it had expanded its cryptocurrency services by introducing a cryptocurrency storage and trading system. The private bank first announced its cryptocurrency initiatives in 2019 to expand business account services to blockchain companies.
With regulatory approval from the Swiss financial market authority, Maerki Baumann will initially offer trading and custody services for five major cryptocurrencies, including Bitcoin, Ether, XRP, Bitcoin Cash and Litecoin. The bank’s announcement came a month after the Capital Markets and Technology Association, also based in Switzerland, published a common industry standard for managing and preserving cryptocurrencies.
The document, called the Digital Asset Preservation Standard, attempts to explain how the custody of digital assets is different from the custody of traditional assets. After identifying the differences, CMTA defined basic security and operational requirements for cryptographic storage service providers.
Supervised by all
It seems that the largest players in crypto have now turned their attention to the cryptocurrency storage sector, with several agreements and partnerships announced in recent months. For example, cryptocurrency exchange Bitfinex announced a partnership with London-based digital property manager Koine, and New York-based cryptocurrency lender Genesis Capital has acquired startup Volt. In addition, cryptocurrency derivative platform Bakkt announced on May 18 that it serves more than 70 cryptocurrency clients.
However, despite the growth in cryptocurrency-related activity, the rules for storing cryptocurrencies are unclear in different jurisdictions. A recent study published by academics at the Leiden School of Law in the Netherlands, emphasizes that the recovery of assets in insolvency is a problematic area.
While experts believe that cryptocurrency regulation is necessary because of the unique properties of cryptocurrencies, many regulators continue to treat coins and tokens in the same way as they do traditional assets.
Conventional rules and cryptocurrencies
To understand why the traditional rules for encryption kits are not appropriate, Alex Boutlin, CEO and co-founder of Trustology, believes that one should first think about why these rules were originally adopted, and told the Cointelegraph:
“The main reason you have the rules is because a guard at one point made a mistake, stole money or completed transactions that they should not have done. Usually these mistakes are not easy to spot because most authentication is always done internally.”
For this reason, most of the rules talk about strict record keeping and transparency, as problems are easier to solve if they are caught early enough. However, this is based on the premise that only accounting firms have access to the books in custody and thus must continuously provide clients and supervisory authorities with funds to audit their internal accounts. “However, blockchain technology does not pursue the cryptocurrency that works with this mystery because the records are publicly available,” Boutlin said.
By its nature, digital assets provide better transparency over traditional assets. It should be noted, however, that the level of transparency varies from one storage model to another. This, along with other unique features such as ownership and consistency, makes it so for targeted cryptographic rules.
The CMTA standard is the starting point
The digital real estate standard proposed by CMTA breaks down the various models that managers can work with. The thesis focuses on two models for business care. It includes distributed and aggregated general ledger accounts, or DLA.
In the combined model, the manager consolidates the client’s assets into one or more accounts. This model is used in most cold storage solutions. According to CTMA, this model can have two main forms:
Host client resources in one or more unified DLAs
Share custodian funds with client funds in one or more DLAs
In a custom DLA form, the manager assigns one or more DLAs to a single client. In other words, while each DLA can be assigned different assets, it is not possible to credit more than one customer. Boutlin believes that these rankings provide insight into the internal models of the various models and should help regulators develop appropriate standards.