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Asian Asset Management Firm to Launch Crypto Custody for Family Offices

Last Updated March 4, 2021 4:04 PM
David Hundeyin
Last Updated March 4, 2021 4:04 PM

Asian asset management firm Fusang Investment Office is set to launch a crypto asset custody service called Fusang Vault in Hong Kong.

The firm, which usually focuses its operations on private family offices in Hong Kong, Singapore and Malaysia, credits heightened interest in cryptocurrencies from high-net-worth individuals and institutional clients for the move.

Crypto Custody Growing Trend

Earlier in July, CCN.com reported that when Coinbase launched Coinbase Custody, its heavily anticipated crypto custody service, the crypto market immediately responded positively, as institutional investors took it as a means of reducing risk when investing in crypto assets.

The same reasoning seems to be at play with Funang Vaults, as CEO Henry Chong alluded to in comments  quoted by the South China Morning Post.

He said:

“Digital assets are akin to bearer bonds, whereby whoever that is holding the security is presumed to be the owner and there is no registration of ownership information of the security. Hence, the way we keep digital asset secured is of paramount importance.”

According to Chong, the goal is to replicate the role of an independent custodian bank in conventional finance, with the aim of providing a reliable digital asset holding service and carrying out periodic audits of these holdings.

Chong provided no detailed information about the operation of Funang Vaults, but he mentioned that the service is expected to go live in Q4 2018, and that the firm is currently working with insurers to provide indemnity for its clients crypto assets.

It is expected that the entry of reliable crypto custody services into the market will have a large positive effect on investment, particularly from risk-averse financial institutions which have historically viewed cryptocurrencies with suspicion.

CCN.com earlier reported that a number of services like Xapo have gained prominence for offering unique, high-security cold-storage solutions for crypto assets. Hedge funds and asset managers who increasingly want to trade crypto may however find such solutions impractical for the purpose of everyday trading, and it is this market gap that Coinbase Custody seeks to fill.

It remains to be seen whether Funang Vaults will position itself as a competitor to Coinbase Custody. In the meantime, not everyone is a fan of the proposed service.

Speaking to the South China Morning Post, Jolyon Ellwood-Russell, a partner at Simmons & Simmons pointed out that since crypto custody is not regulated in Hong Kong, Funang Vault users are solely dependent on the terms and conditions in the service contract in the event of any losses.

In his view, the existing documentation does not take care of all legal eventualities. He said:

“For example, in what capacity are the custodians holding the assets? Are they holding them as a bailment, that is, a trust, so the assets are outside the estate of the custodian on an insolvency. Just having segregated accounts does not automatically mean that on an insolvency the investors assets will be protected or recoverable from a receiver or liquidator.”

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