Square’s foray into digital asset custody and services doesn’t come as a surprise to many. In June, Jack delivered his best rhetoric at the Bitcoin Conference 2021 held in Miami and revealed that Square was toying with the idea of a hardware wallet.
Decipher Square’s recent move
The global digital asset management (DAM) market size is expected to grow from USD 3.4 billion in 2020 to USD 6.0 billion in 2025, at a compound annual growth rate ( CAGR) is 12%. Even the players organized like Morgan Stanley, Goldman Sachs and companies are already aware of the growth potential of the digital currency space.
There is a global need for secure custody alternatives to managing and using digital assets. There’s no question why Square wants to be a force to be reckoned with in this space.
Cryptocurrency wallets are used to receive, send and hold digital currencies. Hardware Crypto Wallets also known as ‘Cold Wallets’ are considered to be more secure than ‘Hot Wallets’ like desktop and mobile wallets. All market participants including institutional and retail investors spoke in unison about asset security.
Security of hardware wallet
There have been cases of hardware wallets being hacked. In July last year, Bitcoin hardware wallet provider Ledger was hacked. Over 1 million user details were compromised. Square will have to address concerns around wallet security in order to position itself as a dominant and trusted player in the custodial services domain.
The role of digital asset custody
Digital asset custodians have an important role to play in expanding the digital asset investment landscape. Since digital assets are more vulnerable than traditional assets, keeping them safe is paramount. To win investors’ trust, digital asset custodians must go further in ensuring the security, transparency, and affordability of custody services.
Several regulatory agencies have been proactive in regulating this burgeoning space. Earlier this year, Thailand’s Security and Exchange Commission announced that digital asset custodial wallet services will be subject to the Digital Assets Business Law to ban the use of assets. digital in illegal activities and money laundering.
The digital asset industry is borderless and flexible. It needs a well-defined supervisory framework to strike a balance between investor protection and growth opportunities for investors.
(Sharat Chandra is an Emerging Technology and Blockchain Evangelist and Keynote Speaker. He advises across sectors, focusing on blockchain, digital transformation, and fintech. He is volunteering as Chairman of the Blockchain Working Group at IET India’s Future Technologies Division.)