Unlocking growth for Bitwise

The challenge

In the realm of crypto Exchange-Traded Products (ETPs), custody is a fundamental aspect that ensures the security and integrity of investors’ digital assets. Professional, institutional-grade custody involves the safekeeping of cryptocurrencies typically involving advanced security measures such as cold storage, which is offline and less susceptible to hacks, as well as enhanced security protocols and multi-signature technology. For institutional investors, robust custody solutions provide the assurance that their investments are protected against theft and loss, making it a critical component of the adoption and growth of crypto ETPs.

Bitwise (formerly ETC Group) introduced a physical Bitcoin ETP on the Deutsche Börse XETRA exchange in June 2020, setting the stage for digital asset listings on Europe’s premier ETF trading platform. With a track record of more than four years and managing assets worth over $1.4 billion at time of writing, Bitwise leverages its team’s experience in traditional finance combined with deep digital asset expertise to deliver innovative investment products.

Recognising the critical role of secure custody in attracting institutional investors, Bitwise continually monitors developments in the custody market to ensure the highest standard of security is in place for its products. Zodia Custody’s leading security processes and air-gapped cold storage technology, coupled with our European regulatory and compliance footprint, were a strong fit for Bitwise’s needs.

This globally focused Bitcoin ETP has a unique Triple-Daily NAV method for expanded liquidity and is aimed primarily at long-term institutional investors but also retail investors. Following this successful product launch, Bitwise considered Zodia Custody for a role within its multi-custodian model.

A multi-custodian model, where multiple custodians are employed to safeguard assets, enhances the overall security and efficiency of crypto ETPs. This model diversifies risk by not relying on a single point of failure, which is crucial in mitigating potential losses from security breaches. It also ensures operational resilience, as the failure of one custodian does not compromise the entire asset pool. Furthermore, using multiple custodians can facilitate better regulatory compliance and improve market confidence as well as foster innovation, making the ETPs more attractive to institutional investors.

The evolution of the Bitwise and Zodia Custody partnership to include a multi-custodian model has been a resounding success. Today, Zodia is Bitwise’s leading custodian and provides security for the majority of Bitwise’s assets under management.

Enhancing security and operational efficiency

A cornerstone of Zodia’s solution for Bitwise is our ability to enhance the overall operational efficiency of an ETP. This includes 24/7 transfers from cold storage and an unlimited number of transfers per day. To further bolster security, we implemented a unique feature of incoming wallet whitelisting, ensuring that funds sent from unknown addresses are placed into quarantine until the wallet is approved or rejected. Combined with our advanced air-gapped cold storage with segregated wallets, this allows us to offer a robust foundation for enduring security and credibility for ETPs.

A strategic advantage in a growing market

With industry-leading capabilities, increased operational efficiency and a multi-custodian model, we support Bitwise in creating competitive advantages and heighten client confidence in the ever-evolving landscape of digital asset ETPs.