No human oversight – Shanghai blockchain start-up bets on new crypto custody approach despite mainland ban
InVault’s custody service launches amid clampdown on ‘illegal’ token sales, cryptocurrency transactions
Kenneth Xu, founder and chief executive of Shanghai-based blockchain start-up InVault, believes the only way holders of cryptocurrencies can be certain about the security of their assets is the removal of any human oversight, a model of safekeeping common among many cryptocurrency exchanges today.
Putting the private keys to your cryptocurrency assets in the hands of senior management is akin to putting all your money in their control
“Today, the vast majority of cryptocurrency exchanges globally still involve their senior management in managing the transfer of digital tokens ordered by clients. Putting the private keys to your cryptocurrency assets in the hands of senior management is akin to putting all your money in their control,” said Xu.
Cryptocurrency traders in China find ways to get around state regulators despite tighter scrutiny
Xu said he was optimistic cryptocurrency custody services will be sought after by exchanges in China keen to avoid the moral hazard of holding clients’ assets, as their primary role should be to focus on matching buyers and sellers of cryptocurrencies.
“In conventional stock trading, securities are all held at a central depository and not by exchanges. The same should apply in the digital token arena too,” he said.
InVault joins the emerging ranks of service platform operators providing cryptocurrency custody services to corporate and asset managers that deal in digital tokens.
Its launch follows repeated warnings against cryptocurrency transactions and token sales – the latter viewed as illegal fundraising – by various regulators and the People’s Bank of China, the country’s central bank.
But the company, which is being backed by venture capital fund Matrix Partners China to the tune of US$5.85 million in seed funding, is to begin offering its services this week. Xu said it had already received an order from a cryptocurrency exchange for the safekeeping of one million ethereum tokens.
