HONG KONG — NOVEMBER 18th, 2021 The five-day physical and virtual events of Hong Kong Fintech Week held in Hong Kong concluded successfully. Huobi Technology Holdings Limited (“Huobi Tech”, stock code: 1611.HK), a leading virtual asset services platform, participated in Hong Kong Fintech Week as one of the exhibitors, and their industry experts were invited to share educational views on the theme of “Crypto as the New Asset Class under Regulated Environment” through their Master Class section.
As the price of virtual assets continues to hit record highs, more investors are attracted to include virtual assets such as Bitcoin to their investment portfolios. Jenny Lau, Head of Hong Kong office, Huobi Trust Company Limited, which is a subsidiary of Huobi Tech, stressed the importance of licensed crypto custody, and explained their roles in Security and Compliance.
The Importance of Crypto Custody Service
Usually when people own traditional assets like cash, bonds and stocks, the assets are held by a third-party custodian such as a traditional bank. But this is not the case for virtual assets. Virtual assets like Bitcoin and cryptocurrencies are very different from traditional assets in the sense that they are built on blockchain and are maintained and managed differently through private keys. In the world of blockchain, crypto custodians offer custody services to protect clients’ virtual assets on their behalf.
Recently, large investment banks are opening their crypto desks, and private bank clients are looking to invest in virtual assets. Virtual assets are becoming an alternative investment and even a new asset class to many investors. End holders of these assets may include banks, family offices, asset managers, brokers or retail investors etc. These players focus on their core business and do not want to deal with operational complexity in securing their virtual assets. Often it takes time and money to establish good operational and technological environment to hold custody for such virtual assets. “That’s where third-party custodians come to play.” Jenny added.
Compliance as a Concern for Investors
Compliance is an important concern for investors. For some investors who invest on behalf of their clients, an independent third-party custodian is required to reassure their clients and regulators that their assets are safely custodied by a neutral party. A compliant and licensed Crypto Custodian would be regularly audited by a governing body and CPA firm, and is subject to the relevant rules and regulations such as anti-money laundering requirements to ensure business and financial transparency.
“In such circumstance, qualified custody service providers are going to meet huge demand in the sense that they not only facilitate secure transactions and settlement, but also play an important role in the entire process from safeguarding the private keys, maintaining segregated accounts, and keeping asset records as credible certification, ” Jenny once again emphasized the importance of licensed custody service providers.
Whether it is due to the impact of the pandemic, various Central Banks continuing to print money which leads to a plummet of benchmark interest rates, or the rapid iteration of the blockchain industry and the outstanding performance of virtual assets, investors have actively started to look for new asset classes. As an emerging alternative asset class, virtual assets such as Bitcoin are widely accepted by an increasing number of large financial institutions and are accelerating their steps towards becoming mainstream investment and commercial assets.