Exclusive: Can Onchain Custodian Fill Fidelity's Gap in Crypto Custody?

Exclusive interview with Alexandre Kech: Part 2

While wall street giant Fidelity tapped into the crypto custodial space, can Onchain Custodian survive under the fierce competition? Alexandre Kech, CEO of Onchain Custodian, believes that they can fill Fidelity's gap in the crypto custodial market! He also explains how the surging demand in BTC futures and crypto collateral can present substantial business opportunities for crypto custodians.

Onchain Custodian has been researching and experimenting on the security of private keys. According to your research, how can Onchain Custodian provide a more efficient and secure custodian solution?

The objective of this research and development on different solutions for storing private keys is to effectively evolve the platform as technology evolves as well. We always want our platform to be the most secure, flexible, and agile. R&D activities help us to decide how our next version should look like. There will, for sure, be a version three, four, or five in the future.

In terms of competitive positioning, traditional Wall Street giants are also tapping into the custodial market for crypto, such as Fidelity. How does Onchain Custodian compare with them? Does Onchain Custodian target different customers compared to Fidelity, or are you direct competitors?

I don't think we are direct competitors at this stage. I would be immodest to think that we can compete with Fidelity. I think we are targeting a different customer base. Fidelity and other traditional players will build the types of services to support who they have as customers today - traditional asset managers and hedge funds, who are not comfortable to invest in certain types of crypto assets and want to have a traditional player helping them with custody.

We are targeting customers familiar with the crypto world because they are crypto players themselves, such as exchanges. 

In the long run, there will be some collaborations between traditional custodians and crypto custodians like us. In the future, we will collaborate and build solutions together to serve different types of customers.

Recently, the interest of Bitcoin futures has hit an all-time high in the Chicago Mercantile Exchange (CME) in June. What opportunities are present for Onchain Custodian in this regard?

Those types of futures products are based on an underlying asset that is not traded, whereas futures contracts are traded. Financial products backed by crypto are probably how the market will develop in the future. There will an increase in derivative products based on cryptocurrencies or based on a basket of tokens traded on exchanges or OTC. Those derivatives will have to be efficiently backed by those cryptos, and the way to back those crypto futures products is to have proper custody of those assets. I think it is just a natural evolution of the crypto space to start with the asset itself and then evolve to derivative products around those assets.

Regarding your partnership with BabelFinance, a company offering loans collateralized by the Bitcoin deposit - what are the challenges in providing custodian solutions for this platform?

This collaboration with BabelFinance is to enable the ability to loan USDT for their customers. For example, in exchange for collateral in Bitcoin that we, Onchain Custodian will take custody over. It brings transparency to their customers with the fact that their collateral is effectively held by a third-party custodian, and BabelFinance does not have access to that collateral unless they agree to it or there is the default at one point. What we can bring here is transparency and neutrality in the process again.

With this BabelFinance and Onchain Custodian collaboration, we will also be able to offer our customers the ability to access financial products around crypto via BabelFinance. For example, they will be able to earn interests out of lending crypto to BabelFinance or to borrow crypto if they need so to cover a short position that they have in exchange.

In Singapore, which trust licenses have Onchain Custodian secured and what are the challenges involved? Does Onchain Custodian already have a trust license in other jurisdictions?

In Singapore, there is no need for a license on digital assets such as crypto and utility tokens because it is a non-regulated asset at this stage. That is why we chose Singapore as it has open-minded regulations; they will not regulate if they do not have the need to do so.

However, as we also want to play a role in the security token space, we are currently preparing for a CMS license or capital markets service license for custody in Singapore. It is required for security tokens as it is the evolution of our business—crypto, utility tokens, and then security tokens. There is also a new regulation in Singapore around payments that includes crypto as a means of payment that will come at the end of the year. Depending on what we facilitate as transactions, we could fall under that regulation, so we might need to also apply for that license as well.

My current question mark is whether, with my status in Singapore, we are allowed to operate and take custody of assets from a Hong Kong fund or a Thai fund, for example. That is something we all need to figure out. Custody of cryptocurrencies is still at its early stage.