The three-year story of Zodia Custody

Date: 17 Nov 2023

Karen Jones

Chief Risk Officer Anoosh Arevshatian and Head of European and MENA Sales Gerry Afentakis of Zodia Custody spoke to Citywealth. We hear the story of what brought this institutional venture to where it is now, and how far it’s planning to go.

Zodia custody: a venture from Northern Trust and SC Ventures

An institutional venture from Northern Trust and SC Ventures, which is a business unit providing a platform for Standard Chartered to promote innovation and investment into disruptive financial technology. The venture agreement started in December 2020. July 2021 saw them registered with the Financial Conduct Authority (FCA). The registration means that Zodia Custody can now provide commercial services to clients as a crypto asset business.

Designed to enable institutions to invest in cryptocurrency assets

As well as crypto and blockchain asset security and recovery, custody has become one of the major investments into crypto to secure and ‘get ready’ for what is set to be an emerging, new economy. Zodia Custody was designed to enable institutions to invest in cryptocurrency assets including transaction and settlement activities. They say: “Cryptocurrencies already represent 0.3% of the world’s currency and bank deposits and are forecast to continue growing with a CAGR of 32% from 2019 to 2024. While there is increasing interest from institutional investors, they account for only 9% of investments in cryptocurrencies at present.”

Rewiring the DNA in banking

There are big names on the line backing this venture. In launching Zodia Custody, Alex Manson of SC Ventures said: “The launch of Zodia shows that we want to rewire the DNA in banking. Drawing on Standard Chartered’s heritage of providing custody services to institutional clients for 160 years, Zodia’s mission is to be a ‘force for good’ by lifting industry standards for digital assets in a sustainable, safe, and responsible way.” Zodia’s capabilities make it possible for institutional asset owners, family offices and asset managers to invest in a range of cryptocurrencies.

Three years setting the frameworks and testing the systems to be crypto client ready

However, new ventures are by their very nature challenging and Anoosh Arevshatian, who started her career in the public sector and has been with Citibank in Johannesburg within Treasury & Trade Solutions and spent her time in Enterprise Risk Management and in London as a Governance Risk & Compliance Methodology Deputy Head, has spent three years at Zodia setting the frameworks and testing the systems to be crypto client ready. Having done this, a realisation occurred that just because you build it, it doesn’t mean ‘they’ will come. Crypto is a different animal. It is getting regulation, but its offerings are different from current financial services.

Gerry Afentakis – 15 years of experience in the financial services sector

Despite this, many milestones have been reached and hiring Gerry Afentakis as Head of Sales is one of them. He has had 15 years of experience in the financial services sector. Prior to joining Zodia Custody, he was the Head of Asset and Wealth Management for Europe at Matrixport which is a crypto /defi platform. Afentakis also formerly served as executive director and head of strategic development at the financial global credit manager EFA Group. He is fluent in English, French, German, Greek, and proficient in Mandarin, his linguistic versatility enables multiple international collaborations, something that is very necessary in crypto which can be found anywhere in the world.

Partners will be vetted with a banking style lens by Zodia

The new frontier that Gerry has come to help build is now a fully-fledged third-party referral and integration business becoming the solus provider for many platforms in the market to corner market share and become a one-stop shop. The partners will be vetted with a banking style lens by Zodia but won’t be controlled or managed by them. This strategy has already started working, as announcement after announcement is seen with integrations; some comprehensive reporting from KYAX and collaborations with big, industry names such as LMAX.  

Innovation with staking

Zodia Custody find themselves ready to take on the new world but sitting with the whole industry in a deep crypto winter. They are looking to develop new products for this sector and as their knowledge grows, taking different calls on risk. As Gerry said, the sector has products such as staking with potential rewards for “locking up” assets as part of participation in the blockchain’s network activities. The potential is huge, and the jury is out on the direction of travel. Whatever the decision, the framework is in place to implement, and they have a strong lead to the rest of the global market. On the topic of tokenization, he thinks the route to adoption is close.

Monetary authority of Singapore ‘Project Guardian’

As the institutional market develops, there is also interesting news that the Monetary authority of Singapore has got ‘Project Guardian’ underway at the back end of 2022. MAS is launching two new industry pilots: Standard Chartered Bank is leading an initiative in trade finance to explore the issuance of tokens linked to trade finance assets. The project aims to digitise the trade distribution market, by transforming trade assets into transferable instruments that are more transparent and accessible to investors.

Enabling digital issuance of wealth management products

In Wealth Management: HSBC and UOB (UOB is a leading bank in Asia with a global network of 500 branches and offices across 19 countries and territories) are working with Marketnode (an SGX-Group 0 Singapore Exchange Limited is a Singapore-based exchange conglomerate, operating equity, fixed income, currency, and commodity markets) & Temasek, who are owned by Singapore’s Ministry of Finance in a joint venture, as a digital markets infrastructure operator. They plan to enable native digital issuance of wealth management products, to enhance efficiency and accessibility for investors. 

UBS Asset Management launched its first live pilot on Project Guardian

Project Guardian also have UBS Asset Management who has launched its first live pilot of a tokenized Variable Capital Company (VCC) fund. The fund is part of a wider VCC umbrella designed to bring various “real world assets” on-chain. There is also ONYX by JP Morgan who have issued a report for institutions to understand crypto concepts.

Global outlook for crypto

The journey however is not crystal clear, and the market is variable depending on the country. Switzerland have pulled ahead and offshore in jurisdictions like Cayman, Bermuda, and the Isle of Man, who are already skilled up; the Asian markets are not resistant to crypto although China says cryptocurrency-related transactions are illegal. Forbes say the recognition of Bitcoin by some Chinese Courts as a unique digital currency gives hope that China could lift the ban on crypto in the future. India is certainly proving attractive with Gemini exchange in India aiming to increase its workforce by 42% before the end of 2023. Although the central government via a notification dated 7 March 2023 has put crypto under AML laws.

FTX court case creates need for industry wide change

Whatever journey lies ahead for Zodia Custody as they go deeper into crypto products, it has done a huge chunk of its learning, soul searching and come to understand the industry better. This is a lot more than most have done whether in the crypto industry or not. It looks like it has been a long, hard journey, and you feel their pain with this as you would with any start up. However, the crypto industry has been pushed into a corner to change, we have seen the enforcement notices flying around and the FTX court room drama.

The sector now accepts it must regulate, even though for Satoshi Nakamoto, the original founder, a government-regulated crypto business makes no sense, it is the direction of travel and makes it likely that the gold rush for Zodia Custody (Bitcoin gold rush or not) is showing a strong light at the end of the tunnel. The sector awaits the next move and the bitcoin halving with interest.