Spartan Group helps accelerate demand for digital asset-based products

Digital assets, particularly in the form of cryptocurrencies and tokens, have been the subject of a great deal of press coverage over the last 18-24 months. Research from Fidelity Investments suggests that 22 percent of institutional investors are already exposed to digital assets, with 40 percent being open to future investments.[1]

These figures demonstrate an evolution of the digital asset marketplace–once dominated by crypto-native funds, it is now moving into the mainstream, towards traditional family offices and endowments. Central to this continued market maturation, however, will be online digital asset availability and transferability for investors to make real-time buying and selling decisions.

For fintech and private banks to offer digital asset services, they must first protect the underlying private keys. All digital assets have one thing in common: the assets are stored in addresses/wallets, with every address being connected to a unique private key that grants users access to that wallet.

The owner of the private key is the owner of the asset. Malicious actors who obtain an investor’s private key are able to transfer all of the wallet’s funds to another wallet they control. Thus, digital asset service providers must either act as custodian or use a third party custody service to protect investor private keys.

The leading firms providing crypto custodial services today include Coinbase, Kingdom Trust, Xapo, Bakkt, Volt, itBit, Fidelity Digital Assets, Bitgo and Gemini. These providers use varying methods of the same fundamental method of cold storage. The irony of cold storage is that it takes digital assets and converts them, essentially, into bearer bonds.

The thinking goes: the less accessible they are to the owner, the less accessible they are to the would-be thieves. Despite keeping digital assets offline, these approaches have not prevented or even reduced hackers and insiders from making away with millions of dollars (cases have included Bitfinex, Coincheck, Bithumb, QuadrigaCX and Binance). CNBC[2] reported that $1.1 billion USD worth of cryptocurrency was stolen in just the first half of 2018.

On-demand digital asset availability is critical for fintech and private banks that are exploring banking services to institutional investors and high-net-worth individuals including crypto-accounts, payments, crypto-fiat services, lending, structured products, brokerage, token origination, staking, stablecoins and crypto-network liquidity provision (Bitcoin Lightning Network).

Digital asset service providers such as banks, fintech, crypto exchanges, custody providers and others can now build and offer crypto-native solutions that make active participation in crypto-economic networks possible 24/7 using IBM’s LinuxONE Hyper Protect Platform. 

IBM’s technology is predicated upon industry-leading FIPS 140-2 Level 4 hardware security modules that encrypt digital asset private key stores, wallet applications, smart contracts and other Docker containerized applications deployed into the market in a unique FIPS 197 compliant trusted execution environment called the IBM Secure Service Container.

Instead of complicated and costly-to-administer appliances and specialized devices, the IBM technology leverages proven open-source cloud computing and flash storage. This LinuxONE Hyper Protect Platform technology has been in production serving and securing the IBM Blockchain Platform since 2016.

To bring this important technology to Asia Pacific’s fintech and private banks, IBM is partnering with one of the leading digital asset advisory consultancies in the region, Spartan Group.[3] From co-creating design thinking workshops for digital asset business model monetization to organizing digital asset security events, Spartan Group and IBM are helping fintech and private banks accelerate demand for digital asset-based products.

For more information about IBM LinuxONE Hyper Protect Services, visit www.ibm.com/cloud/hyper-protect-services.

About Spartan Group

Spartan Group is a leading Asia-based blockchain advisory and investment firm. Our founders are former Goldman Sachs bankers, venture capitalists, tech investors and early blockchain/crypto advocates. Our advisory business provides services across the digital assets space, working with start-ups as well as Fortune 500 companies.

[1] https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/press-release/institutional-investments-in-digital-assets-050219.pdf

[2] https://www.cnbc.com/2018/06/07/1-point-1b-in-cryptocurrency-was-stolen-this-year-and-it-was-easy-to-do.html

[3] https://www.spartangroup.io