By Staff Reporter
Copper was the first purpose-built digital asset infrastructure provider to focus on the financial services industry. The company uses multi-party computation (MPC) encryption along with proprietary air-gapping methodology to ensure the security of client-segregated assets. Blockchain Asset Review interviews Tyler Kenyon, the marketing director of the company on what makes Copper different as an institutional gateway for digital asset investing.
How old is your company?
Copper was founded in January 2018 by a core team that had been working together on another previous blockchain project.
But it was really Dmitry Tokarev’s experience as a quant and later a CTO that drove the decision to move into digital asset infrastructure. The London asset manager he was a partner at had been getting calls almost daily from investors looking to allocate small portions of their portfolio to BTC. But the institutional asset management industry was entirely unprepared for this demand. There were no custody solutions on the market that understood the unique attributes of crypto and what the technical and business operating procedures required to secure it looked like. At the same time, if you asked the existing retail crypto storage solutions if they offered custody, they’d often never have even heard the word.
This is ultimately why Copper was founded: to build a way to securely acquire and store digital assets, in partnership with the finance and tech communities, in a way that made sense to both communities.
What are the key issues facing exchanges and hedge funds dealing with crypto and how is copper solving it
There are three key issues affecting exchanges and hedge funds in this space:
Speed: The speed issue we have resolved by enabling our clients to trade and settle off-exchange. There are some significant barriers to asset managers who pursue exchange arbitrage strategies when they rely on block confirmations to move assets onto exchanges. We studied the periods of highest volatility across major exchanges and determined that most arbitrage opportunities last roughly ten minutes. Unfortunately, this coincides with huge volume increases which put a strain on transactions. Block confirmations can then take more than 20 minutes, meaning traders are missing opportunities. But by allowing digital assets to be allocated to an exchange via an application programming interface (API), without actually making an on-chain transaction, our clients can be ready to trade on exchange within 100 milliseconds.
Security: This ability to hold assets off-exchange also answers the second key issue, security. It’s no secret that the nascent nature of our industry has led to many famous examples of human error where assets were lost. There is also no shortage of examples where exchanges have been hacked, leading to losses, or assets have been frozen on an exchange. By not moving assets on to an exchange, traders do not face these risks, and they are additionally protected from exchange-based credit risk.
Regulatory clarity: Finally, there remains a distinct lack of clarity, or global cohesion, on how digital assets should be treated under the law. To some extent, we have great sympathy for regulators who have the job of first understanding the complex cryptocurrency landscape, then figuring out how it ties into existing regulatory framework, while at the same time trying to foresee what developments might be around the corner that could change the status quo dramatically. Regulators are tasked with providing trust in the system for the benefit of everyone, but they must not stifle innovation. That’s no easy job.
For our part, we work very closely with the Financial Conduct Authority (FCA) in the UK to ensure that our business is understood, and to ensure that we comply with existing financial services regulations. It’s incredibly important that our clients and prospective clients know where we stand on this issue. For greater adoption of crypto as an asset class unto itself, or within an existing asset class, we all need to be playing by the same rules.
There are some considerable benefits that blockchain technologies can bring to regulators, particularly on the issue of transparency and the speed at which auditing can be done. But it will take time before this is fully embraced.
What makes your firm different from others in the industry?
Copper was the first purpose-built digital asset infrastructure provider to focus on the financial services industry. The company uses multi-party computation (MPC) encryption along with proprietary air-gapping methodology to ensure the security of client-segregated assets.
No one better understands the operational and legal requirements of hedge funds in this space. Copper builds products and services with clients to ensure the market fit is exact, which is why we have won numerous awards as a digital asset custodian.
No other custodian has the same off-exchange access as Copper, or secure links to DeFi, or the same opportunities to leverage uncollateralized margin funding. Our pace is unrivaled.
Asia being the hottest market for crypto tell us about your Asia plans and growth?
Asian investors are early adopters, that is well understood. In fact, the earliest calls we had about the need for digital asset custodial infrastructure came from Asian hedge funds.
Earlier this year, we began expanding into the region and opened an office with our head of trading in Hong Kong, Jonathan T. You may have seen him speak recently at Hong Kong Blockchain Week. We had anticipated hosting many events in the region in 2020, but for the obvious reason these were postponed. We have also expanded our business development presence in India, headed by Karthik Iyer and Devaki Sahasrabudhe.
In 2021, we anticipate more clarity from regional regulators in Singapore, India, Hong Kong, and Japan, which will usher in unprecedented demand for digital asset infrastructure and fuel further growth for our firm.
What are your plans for the future?
In a word: growth. In two words: global domination. There is a seismic shift underway in financial services. The legacy institutions we’re all familiar with are well behind the curve. While their pockets are certainly deep enough to maintain their position for a while, if they wish to keep up with the rapidly evolving world of digital assets, they must embrace innovation and learn to adapt quickly enough to keep up with the disruptors and challengers – including Copper.