Standard Chartered is partnering with Northern Trust to launch a cryptocurrency custodian service in the UK.

The agreement between SC Ventures and asset servicing firm Northern Trust will launch Zodia Custody, an institutional-grade custody solution, as consumer adoption of crypto currency and digital assets rises.

Cryptocurrencies already represent 0.3 per cent of the world’s currency and bank deposits and are forecast to continue growing with a CAGR of 32 per cent from 2019 to 2024.

While there is increasing interest from institutional investors in digital asset classes, they account for only 9 per cent of investments in cryptocurrencies at present.

Zodia is designed to enable institutions to invest in the emerging cryptocurrency assets that are transforming how financial markets operate, including transaction and settlement activities, the companies said in a statement.

Under the agreement, which is subject to registration with the UK Financial Conduct Authority (FCA), all applicable regulatory filings and customary closing conditions, Zodia is expected to begin operations in London in 2021.

StanChart said that Zodia combines the traditional custody principles of a bank with the agility of a FinTech company to provide an infrastructure that meets the high standards and expectations of institutional investors through a platform that adapts to the changing needs of clients and the market.

At launch, pending regulatory approval, Zodia will provide custody services for the most-traded cryptocurrency assets – Bitcoin, Ethereum, followed by XRP, Litecoin, and Bitcoin Cash – which represent the majority of client demand and activity, accounting for approximately 80 per cent of the total assets [equivalent to $395 billion] traded on leading cryptocurrency exchanges.

Maxime De Guillebon, chief executive of Zodia, said: “Zodia was established to address the need for a cryptocurrency custodian that truly understands custody. We combine the risk management, compliance, governance and security approach of a regulated financial institution with the cutting-edge innovation of crypto asset and key management technologies. By doing so, we enable operational efficiency and speed of transaction without compromising on security or reliability.”

Alex Manson from SC Ventures, said: “The launch of Zodia demonstrates our commitment to rewiring the DNA in banking. Drawing on Standard Chartered’s heritage of providing custody services to institutional clients for 160 years, Zodia’s mission is to be a ‘force for good’ by lifting industry standards for digital assets in a sustainable, safe and responsible way.”

Alongside its partnerships with blockchain service providers, Standard Chartered has invested in core technology provider Metaco and is collaborating with the Bank of Thailand and the Hong Kong Monetary Authority to explore distributed ledger interoperability for cross-border fund transfers.

Zodia Custody is in the process of registering with the FCA under UK Money Laundering Regulations and will apply standards that are equivalent to the custody of traditional securities.

Pete Cherecwich, president of corporate & institutional services at Northern Trust, said, “The introduction of digital custody backed by the know-how and experience of global banks is a breakthrough in the evolution and support of institutional cryptocurrency markets.

He added: “Zodia’s robust capabilities will make it possible for institutional asset owners, family offices and asset managers to invest in a range of cryptocurrencies as interest continues to grow in these emerging and innovative financial instruments.”

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