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Ledger, CoinShares, and Nomura Join Forces to Launch Komainu, an Institutional Grade Bitcoin Custody Service

Komainu was first announced in May 2018. The companies which make up the joint venture include Ledger, a hardware wallet and crypto asset security firm, Coinshares, a crypto investment fund, and Nomura, a Japanese based global investment bank.

Komainu focuses on combining the high-end experience of traditional custody with state-of-the-art technology to meet institutional requirements and claims to be the first regulated digital asset custody solutions “built by institutions for institutions.”

The word Komainu refers to a pair of statues resembling lion-like creatures, which are often called lion-dogs in English, that guard the entrance of many Japanese Shinto Shrines. The name reflects the companies’ mission of protecting institutional crypto assets, as well as the hybrid nature of offering crypto services to legacy financial institutions.

In traditional financial markets, a custodian is a financial institution that provides a secure storage service for financial securities. The goal is to minimize the risk of loss or theft. In the blockchain space, custodians provide the same services and are often tailored to institutional crypto asset investors.

Crypto custodians securely store crypto assets for investors who want to minimize the potential loss of funds due to a lack of technical expertise or are required to use a qualified custodian by law. Due to the technical challenges involved in securely storing and managing crypto assets, crypto custodians provide a critically important service.

Komainu is being led by CoinShares Co-Founder and Chief Executive Officer Jean-Marie Mognetti. Other notable employees include Chief Information Security Officer Andrew Morfill, former global head of cyber defense at Banco Santander, and Head of Regulatory Affairs Susan Patterson, who previously worked at Credit Suisse and UBS.

"What this partnership has highlighted is the need for credible and solid service providers to support industry participants,” Mognetti said in a statement. “Komainu bridges the gap by bringing financial expertise and capabilities for institutional clients to feel confident their assets are in safe hands”.

Komainu is incorporated in Jersey, a self-governing island between France and England, and is regulated by the Jersey Financial Services Commission. The country has become known for its progressive regulatory environment for fintech and crypto companies.

In a phone interview with Reuters, Mognetti stated, "We have been trialing the platform with a limited number of clients for four to five months and are now launching to new clients." The launch of the company comes at a time of increasing institutional interest in digital assets. Grayscale, an institutionally focused Bitcoin trust, hit a record high for quarterly inflows into all their crypto funds for Q1 2020, despite the uncertainties in the global economy brought about by COVID-19.

Ledger, CoinShares, and Nomura Join Forces to Launch Komainu, an Institutional Grade Bitcoin Custody Service (1)
Source: Grayscale Q1 2020 Report

Komainu claims to have an advantage over competing institutional-grade crypto custodians through its ability to integrate with the technology systems already being used by large financial institutions.

Several large financial institutions, including Nomura, are hoping that traditional assets such as bonds or stocks can be digitized and issued using blockchain technology to cut costs and simplify some processes. The lack of back-office services from major financial service providers has long prevented the wider adoption of digital assets.

Komainu services are only offered to clients that have passed anti-money laundering and capital provenance checks. With the increasing quantity of money being laundered with the assistance of cryptocurrencies, ensuring that assets under custody are of a legal origin is imperative to maintaining Komainu’s standing as a compliant institutional custodian. The CEO of Ledger, Pascal Gauthier, said in a statement that “Institutions are looking for compliance and security when it comes to the custody of digital assets.” He added that, without the proper security, “institutions’ digital assets are weaponized against them.”

Both Fidelity, a multinational financial services company, and BAKKT, a Bitcoin futures platform, have launched institutional crypto custody services within the last year. Nomura’s entry into crypto custodian services follows a crypto-asset benchmark for Japanese investors, which the company launched in January this year. The company also sits on the governing council of the blockchain network Hedera Hashgraph, along with the likes of Google and Deutsche Telekom.

Custody of digital assets that cater to institutional investors’ needs has been an area of intense development over the past few years. While the specific list of services differs from one provider to another, the majority of crypto custodians offer an enterprise-grade cold storage solution, fork management, asset insurance, and around the clock customer service. Some custodians, such as Coinbase Custody, also offer staking support and on-chain governance participation.

In the digital asset markets, SEC-registered crypto hedge funds, blockchain venture capital firms, RIAs, and family offices make up the bulk of digital asset custody clients. The number of pension funds and mutual funds that are investing is still small as the regulatory hurdles to invest in high-risk alternative assets for these types of funds remain considerable.

With a healthy number of qualified crypto custodians to choose from, including some backed by major Wall Street firms, the barriers for institutional investment in the cryptocurrency space are gradually being lowered.

Mutual funds and insurance funds, who have some of the strictest investment constraints, may soon be able to start venturing into digital assets now that the technical and cybersecurity risks of holding crypto assets are no longer an issue.


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