Convergence Latest: Mainstream Finance Looks To Offer Crypto Custody
Today we bring you more news of the gathering pace of convergence between cryptocurrencies and mainstream finance. This is clearly driven by the price resurgence of flagship crypto, Bitcoin. What’s driving that is another matter…
Asset servicer Northern Trust and Standard Chartered have sought to capitalise on the growing demand for cryptocurrency services by jointly developing a digital custody service aimed at institutional investors.
Northern Trust has partnered with SC Ventures, the innovation arm of Standard Chartered, to launch Zodia Custody which is expected to begin operations in London in 2021 subject to regulatory approval.
Initially it will provide custody services for the most commonly traded crypto currencies – bitcoin and ethereum, followed by XRP, litecoin and bitcoin cash – which collectively account for around 80% of the total assets traded on the major crypto exchanges.
While cryptocurrencies currently represent just 0.3% of the world’s currency and bank deposits, they are forecast to grow at a compound annual growth rate of 32% over the next five years.
And while institutional investors’ interest in the digital asset class is increasing, they only account for 9% of cryptocurrency investment at present.
One of the impediments to wider involvement has been the absence of fully regulated service providers, including custodians as well as trading exchanges.
Just last month digital asset security vendor Curv announced a partnership with Germany’s Solaris Digital Assets to develop a crypto custody service which is also expected to launch next year.
Meanwhile, Nomura, one of the first banks to reveal its digital custody plans back in 2018, announced a partnership with digital asset investment house CoinShares and crypto security firm Ledger in June 2020 to launch Komainu, a crypto custody offering, regsitered in Jersey, that is also aimed at institutional investors.
Historical Performance And IFISA Process Guide
- Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee).
That figure is the result of over £20 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
- Money&Co. has been lending for over 5 years and has only had two bad debts so far, representing a bad debt rate of 0.03 per cent per annum.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
- Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
- Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
- Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.
The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.