Bankex has launched a crypto custody service targeted at individual investors. This service will allow coinholders to keep their crypto assets in a secure, bank-like storage system.
The company is now accepting deposits of Bitcoin, Bitcoin Cash, Litecoin, Ethereum, and ERC-20 tokens. Customers can also store money in the platform’s native BKX token, which will allow them to take advantage of reduced service fees.
When you handle cryptocurrency in its basic state, you are required to take care of your own security. This means you must safely maintain a set of private and public keys. As Bankex observes:
“Using crypto, you relinquish all the physical monetary attributes you are accustomed to. There are no cards or banknotes…[and there is no] customer service line. Users with unresolved questions can find themselves on their own.”
Bankex warns investors of three major causes of financial loss: “human factors, physical damage, and online attackers.” In other words, if you secure your private keys improperly, they could be lost, forgotten, or stolen.
Custody services reduce the difficulty of securing your crypto. They store cryptocurrency by holding your funds and applying their own security measures. By using Bankex’s custody service, users can access their funds via a traditional login page. Users will also have access to customer support if anything goes wrong.
Bankex also encrypts its databases so that they cannot be seen by human eyes, except when necessary. The automated environment will automatically allow small withdrawals, while Bankex will manually review more substantial withdrawals for added security.
Most custody solutions are targeted at institutional investors and hedge funds. Coinbase Custody, which launched in July, is currently the leader in this realm. Since then, some financial institutions, such as Goldman Sachs, have considered launching their own custody service.
However, platforms like Coinbase Custody are out of reach for most individuals: the minimum deposit is $10 million worth of cryptocurrency, and that is on top of a $100,000 set-up fee. Bankex, meanwhile, is offering its services to anyone: there is no minimum deposit, just a monthly commission fee of 0.2%.
In a way, Bankex is quite similar to the vast array of online wallets that are already available to individuals. It seems it won’t be competing directly against institution-grade custody providers, instead focusing on consumer-grade crypto storage.
Advocates of decentralization frequently disavow centralized crypto storage: Vitalik Buterin infamously told centralized exchanges to “burn in hell.” To many, the main appeal of cryptocurrency is the fact that it can provide freedom from banking services and other middlemen.
Centralization can, however, streamline the process of crypto management. Unfortunately, centralized storage providers have a lot of control over their customers: they can lock accounts and prevent people from accessing their funds. They are also frequently targeted by hackers, despite their best security efforts.
Although manual crypto management is not always straightforward, it provides advantages over centralized storage if done correctly. Nevertheless, centralized storage remains incredibly popular and accessible. It seems that Bankex and similar services will continue to prosper.