IBM Enters Crypto Custody With Tech Solution Targeting Banks
IBM has designs on making an entry into the crypto custody market, albeit without being a custodian itself.
The move comes as reports emerge that New York-based investment firm Shuttle Holdings is set to launch a crypto custody solution that will be built on IBM’s technologies.
Scheduled for launch later in March, the platform will provide cryptocurrency storage tools for banks, custodians, brokers, family offices, and funds. Others to benefit from the service will be exchanges and high net worth investor looking to manage self-custody.
The chief investment officer of Shuttle Holdings, Brad Chun, said that the platform will launch a beta version of the solution later this month and will be open to select clients.
Big Blue showcased the crypto custody solution during the “Think 2019” conference held this February in San Francisco. At the time, the company’s CTO Nataraj Nagaratnam said that the crypto custody provided the tech giant with a prime use case for its cloud service.
IBM’s involvement in the digital asset market appears to be gathering momentum with this development, adding to its earlier work on the enterprise-focused Hyperledger Fabric recently, partnerships with the Stellar Foundation.
It is also notable that it comes at a time the race to provide crypto custody has moved from crypto exchanges and wallets to mainstream financial providers, like Fidelity Investments and Switzerland’s Swissquote Bank.
Not the ‘ordinary’ cold storage facility
It is reported that the IBM/Shuttle Holdings offering will be remarkably different from other custody solutions.
Primarily, it won’t be the traditional cold storage type offered by many crypto custodians; whose premise is that private keys storage happens on an offline device.
Though offline cold storage is a great way to keep attack vectors at bay, Chun noted that enterprises would prefer to remain connected to their customers, most would like to have their data and digital assets secured but readily accessible.
For that reason, Chun added, IBM Cloud has helped Shuttle develop a system that goes beyond providing the “ordinary” cold storage services to clients.
According to Chun, the digital asset solution leverages the hardware security module (HSM) technology to manage a client’s private keys, providing tamper-proof security. He added that the keys are secured by encrypting them “in multiple layers as data blobs.”
The technology allows companies to store backups to the digital keys “using their pre-existing disaster recovery” processes and backup media. These features mean that the IBM Cloud solution could see every business begin to custody digital assets, from cryptocurrencies to real estate and identity.
More firms look at HSMs
The debate over which between HSMs and traditional cold storage provides a user with the best has continued to split opinions- primarily in relation to the supposed security versus efficiency trade-offs when handling crypto asset storage.
Using a cold storage solution requires human involvement and accessing assets often takes an hour or two, though that could need up to two days. In contrast, HSMs are purely electronic thus access becomes much faster.
According to Demetrios Skalkotos, the head of Ledger Vault, the HSMs technology is currently only used by banks and governments.
Trustology, a startup backed by ConsenSys, has also been working on an HSM solution for crypto custody. The firm’s CEO Alex Batlin, thinks people tend to prefer cold storage just because it is said to be offline.
He explains that it has given users “a false sense of security,” as having a human involved opens up space for nefarious activities.
However, proponents of cold storage, including BitGo CEO Mike Belshe, maintain that latency and potential human interference is a small price compared to the security it offers.
IBM’s move sees it join others like Switzerland’s Crypto Storage AG and Japanese bank Nomura in providing enterprise-grade HSM crypto custody solutions.
Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.