{"id":137426,"date":"2020-12-19T17:07:00","date_gmt":"2020-12-19T14:07:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/traditional-crypto-custodians-ramp-up-security-to-accommodate-institutional-demand\/"},"modified":"2020-12-19T17:07:00","modified_gmt":"2020-12-19T14:07:00","slug":"traditional-crypto-custodians-ramp-up-security-to-accommodate-institutional-demand","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/traditional-crypto-custodians-ramp-up-security-to-accommodate-institutional-demand\/","title":{"rendered":"# Traditional crypto custodians ramp up security to accommodate institutional demand"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a301b4147aed\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a301b4147aed\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/traditional-crypto-custodians-ramp-up-security-to-accommodate-institutional-demand\/#Offline_security_a_must_for_safeguarding_digital_assets\" >Offline security a must for safeguarding digital assets<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/traditional-crypto-custodians-ramp-up-security-to-accommodate-institutional-demand\/#Traditional_players_believe_offline_storage_is_a_must\" >Traditional players believe offline storage is a must<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/traditional-crypto-custodians-ramp-up-security-to-accommodate-institutional-demand\/#Is_offline_protection_enough\" >Is offline protection enough?<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Traditional crypto custodians ramp up security to accommodate institutional demand <\/strong>&#8221;<br \/>\n<img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjAtMTIvZTY0YjQ1MjQtYmQyMC00ZjcyLWJiNzUtOTlkNjIxYjNhZjlkLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-5a136f3a>Institutional investors are paying close attention to digital assets as Bitcoin (BTC) continues to soar past record-breaking levels, almost reaching the valuation of $24,000 for the first time in its history.<\/p>\n<p>Recent findings from a Bank of America\u2013Merrill Lynch survey conducted between Dec. 4 and 10 show that about 15% of fund managers with $534 billion under management believe Bitcoin to be the third-most crowded trade behind being long on <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a> shares and shorting the U.S. dollar. In addition, a recent Fidelity survey found that out of almost\u00a036% of the respondents, or 774 institutional investors, own crypto assets.<\/p>\n<p>Yet as Bitcoin continues to capture the attention of professional investors worldwide, security measures, along with insurance guarantees, are becoming more important than ever before. This has especially become the case as more traditional custodians and banks add support for digital assets. <\/p>\n<h3><span class=\"ez-toc-section\" id=\"Offline_security_a_must_for_safeguarding_digital_assets\"><\/span>Offline security a must for safeguarding digital assets<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>A <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/advisory.kpmg.us\/content\/dam\/advisory\/en\/pdfs\/2020\/kpmg-cracking-crypto-currency.pdf\">report<\/a> released this year from Big Four firm KPMG shows that the number one key action for crypto-asset custodians looking to build a sustainable business model is enabling next-generation security and resilience. KPMG\u2019s report notes that this involves incorporating leading cryptographic techniques, including multi-sig, sharding and multi-party computation, and dedicated physical hardware. In other words, online and offline security measures are required for safeguarding digital assets.<\/p>\n<p>Lior Lamesh, CEO and co-founder of GK8 \u2014 an Israeli blockchain cybersecurity company \u2014 told Cointelegraph that when it comes to traditional institutions with large amounts of money and reputations to manage, offline security procedures, in particular, are critical for digital asset protection:<\/p>\n<blockquote><p>\u201cSince a blockchain is an immutable ledger, organizations must do everything possible to avoid hacks. When it comes to hot wallets, it\u2019s easy to understand why these are vulnerable \u2014 they are always connected to the internet. This, however, is not secure enough for banks and traditional custodians.\u201d<\/p><\/blockquote>\n<p>For example, Lamesh said that the team of former Israeli military cybersecurity personnel behind GK8 has developed a completely offline solution for traditional custodians and banks seeking digital asset protection. It consists of an \u201cair-g<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ed\u201d cold vault that provides the ability to create transactions on a blockchain network while operating entirely offline. <\/p>\n<p>The process of executing blockchain transactions offline eliminates all potential attacks on users\u2019 private keys, providing full protection against cyber threats, according to Lamesh. While he couldn\u2019t disclose all the details,\u00a0Lamesh shared that this solution is made possible due to patented cryptography that enables the vault to create, sign and send blockchain transactions in a unidirectional connection, without receiving any digital input that can include malicious code. In addition, GK8\u2019s cold vault is backed by a $500-million insurance coverage.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Traditional_players_believe_offline_storage_is_a_must\"><\/span>Traditional players believe offline storage is a must<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>One company that leverages an offline custody solution is Prosegur, a Spanish security company that serves as a custodian of physical security for traditional banks and manages over 360 billion euros annually. <\/p>\n<p>Last year, the firm was <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.zdnet.com\/article\/security-firm-prosegur-weve-shut-our-it-network-after-ryuk-ransomware-attack\/\">attacked<\/a>\u00a0by the Ryuk ransomware, a Trojan virus that encrypts files on a compromised device, typically demanding payments in Bitcoin to decrypt them. This particular attack is concerning for a number of reasons, but security has become even more of a priority for Prosegur ever since the firm\u00a0<a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.explica.co\/spanish-security-company-founded-in-1976-launches-bitcoin-custody-service\/\">launched<\/a>\u00a0\u201cProsegur Crypto,\u201d\u00a0a service for custody and management of digital assets. <\/p>\n<p>Raimundo Castilla, CEO of Prosegur Crypto, told Cointelegraph that Prosegur\u2019s new service addresses growing market demand for safeguarding digital assets, especially as more institutions become involved with crypto. <\/p>\n<p>According to Castilla, the company examined a number of diverse security offerings, including cloud solutions and hardware security module based cryptographics. However, he noted that the offline solution was different in that it leaves no risk for possible external attacks due to the fact that it\u2019s entirely offline. \u201cIt is definitely the most secure solution we\u2019ve encountered and was exactly what we were looking for as security experts,\u201d he said.<\/p>\n<p>Yet companies like Prosegur are not the only ones opting for offline security solutions. OSL, one of Asia\u2019s leading digital asset platforms and member of BC Technology Group, is also using military-grade offline security protocols to safeguard digital assets for hundreds of institutional clients and professional investors. <\/p>\n<p>Wayne Trench, CEO of OSL, told Cointelegraph:\u00a0\u201cThese include military-grade online and offline security protocols, strict Anti-Money Laundering and Know Your Customer requirements, market surveillance and client asset segregation.\u201d<\/p>\n<p>Trench further shared that OSL has a number of rigorous onboarding procedures in place, along with full insurance in the case of both hot and cold wallet crimes. Security measures are mandatory for OSL, which recently became one of the first publicly listed companies licensed by the Securities and Futures Commission of Hong Kong to\u00a0operate regulated brokerage and automated trading services\u00a0for digital assets.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Is_offline_protection_enough\"><\/span>Is offline protection enough?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>While offline security procedures are necessary for safeguarding billions of dollars in digital assets from cyber threats, there are some challenges worth recognizing. <\/p>\n<p>For instance, cold storage facilities are inherently less liquid than online solutions. While some investors may not consider this to be a dealbreaker, KPMG\u2019s \u201cInstitutionalization of Cryptoassets\u201d <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/assets.kpmg\/content\/dam\/kpmg\/us\/pdf\/2018\/11\/institutionalization-cryptoassets.pdf\">report<\/a> notes that digital assets typically utilize public key infrastructure. However, PKI has presented challenges in the past in terms of disaster recovery. KPMG\u2019s report points out that challenges such as these are magnified for crypto operations, which are dependent on the availability of public and private keys to transfer assets.<\/p>\n<p>The report further states that organizations managing key pairs will need to develop disaster recovery plans for securing private keys within each storage tier, for each type of digital asset. However, traditional techniques, such as the use of a hardware security module as mentioned may fall short, given its physical dependence. The report states:<\/p>\n<blockquote><p>\u201cA destroyed or unavailable [hardware security module] could mean lost or unavailable cryptoassets. In addition, other traditional resiliency techniques, such as high availability, either compromise security or are simply not technically possible for an air-gapped cold wallet.\u201d<\/p><\/blockquote>\n<p>Despite concerns, traditional custodians and banks are well aware that security is the most important feature when supporting digital assets. Yet this has been challenging to navigate, as Castilla noted that the custody market typically offers standard cybersecurity solutions that haven\u2019t always been invulnerable against the risk of loss from undue physical access.<\/p>\n<p>As such, Castilla explained that moving forward, solutions should transparently show not only the physical protection of assets and access to systems but also the cybersecurity of the space, in which the asset management occurs: \u201cThis is the way to manage secure transactions for blockchain-based assets, as this is an aspect of enormous vulnerability that institutional investors have to consider in their custody decision.\u201d<\/p>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/traditional-crypto-custodians-ramp-up-security-to-accommodate-institutional-demand\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Traditional crypto custodians ramp up security to accommodate institutional demand &#8221; Institutional investors are paying close attention to digital assets as Bitcoin (BTC) continues to soar past record-breaking levels, almost reaching the valuation of $24,000 for the first time in its history. Recent findings from a Bank of America\u2013Merrill Lynch survey conducted between Dec&#8230;.<\/p>\n","protected":false},"author":1,"featured_media":137427,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/s3.cointelegraph.com\/uploads\/2020-12\/e64b4524-bd20-4f72-bb75-99d621b3af9d.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74867,74862,74863,74355,71939,117,72287],"class_list":["post-137426","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-altcoin","tag-bitcoin","tag-cryptocurrencies","tag-adoption","tag-banks","tag-business","tag-security"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/137426","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=137426"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/137426\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/137427"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=137426"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=137426"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=137426"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}