In a recent development, Citigroup Inc. has initiated a review of its existing digital-assets custody partnership following Ripple Labs Inc.’s acquisition of Metaco for $250 million last month. While the deliberations remain confidential, individuals familiar with the matter have revealed that Citigroup has engaged in preliminary discussions with alternative providers. The Wall Street bank had initially announced its partnership with the digital asset manager in June of the previous year.
Challenges Faced by Crypto Custodians
Shifts in the traditional financial sector towards digital assets have created lucrative opportunities for startups, particularly in the realm of custody services. However, this year has witnessed the termination of several partnerships between companies and crypto custodians, highlighting the challenges faced by smaller firms in this rapidly evolving technological landscape.
The exact connection between Citigroup’s review and Ripple’s acquisition of Metaco remains unclear according to Bloomberg. Ripple had previously emphasized that the crypto company would operate independently under its current leadership, with CEO Adrien Treccani at the helm. Both Citigroup and Metaco declined to provide comments, while Ripple did not respond to requests for clarification.
Another notable instance this year involved EDX Markets, a newly launched crypto exchange backed by prominent Wall Street players such as Fidelity Digital Assets, Citadel Securities, and Charles Schwab Corp. Reports suggest that EDX Markets abandoned its plan to utilize Paxos as a custodian along the way and is now engaged in advanced discussions with Anchorage Digital for a potential partnership. Likewise, State Street Corp. terminated its licensing agreement with crypto custody firm Copper four months ago.
Custody services have gained significant attention within the crypto industry, particularly after the collapse of several prominent firms last year, which left countless investors unable to access their assets. Ripple estimates that the crypto custody market for institutions alone could reach nearly $10 trillion by 2030, underscoring the potential for growth in this sector.
Metaco Acquisition and Ripple’s Expansion
Ripple’s acquisition of Metaco aligns with its strategic objective to expand beyond payments by offering clients the ability to tokenize, settle, and custody various assets. Tokenization, a process facilitated by blockchain technology, involves creating digital representations of real-world assets. When Citigroup announced its partnership with Metaco last year, it emphasized the exploration of custody solutions for assets such as traditional securities.
Metaco has also forged partnerships with BNP Paribas SA and Societe Generale SA’s digital asset arm Forge. While BNP Paribas declined to comment on the current status of its partnership, Societe Generale confirmed that its collaboration with Metaco remains active.
Final Thoughts
Industry experts continue to monitor the evolving landscape of digital assets custody as traditional financial institutions navigate the challenges and opportunities presented by this burgeoning sector. As Citigroup evaluates its partnership with Metaco, the future of custody solutions within the crypto industry remains a topic of keen interest.
Giancarlo is an economist and researcher by profession. Prior to his addition to Blockzeit’s dynamic team, he was handling several crypto projects for both the government and private sectors as a Project Manager of a consultancy firm.
