The Custodianship of Digital Assets With Hex Trust's Team
Sam Ameen and Alessio Quaglini from Hex Trust talk about the future of the crypto asset custodianship space, some of its misconceptions, and the challenges the company faced.
Summary
We sat down with Alessio Quaglini, cofounder of Hex Trust, and Sam Ameen, a part of the marketing team, to talk about the firm and its project, the hurdles that come with entrepreneurship, and where they see the future of the asset custodian space heading.
Quaglini and Rafal Czerniawski, the other cofounder, first came up with the idea for Hex Trust in 2017, hoping to bridge a critical gap for crypto traders. Unlike traditional trading, digital assets owners had no way of safekeeping their investments like they could with national currencies, gold, and other assets.
“We identified the need for a bank-grade custodian for digital assets as there weren’t many options, especially in Asia. We knew that TradFi would eventually enter the industry. When they did, they would need a platform like Hex Trust, which was fully licensed, compliance-focused, and had the highest levels of security available in the market,” Ameen told SGC.
Hex Trust holds digital assets, particularly currencies, on behalf of institutional investors, in a safe, secure, and regulated platform. Since launching nearly five years ago, they have expanded their services to offer financial institutions with extensive coverage of the top emerging protocols and standards including BTC, ERC-20, ERC-721, ERC-1155, and ASA across cryptocurrencies, utility, governance, security tokens and NFTs.
Since SGC teamed up with Hex Trust in March 2022, we have since witnessed the platform’s growth continue to rise and more services and expertise being transferred to investors in the space– something the crypto market is in need of.
“In every conversation we had with [Sino], we clearly saw [their] passion for the industry, deep knowledge of crypto, vast network, and willingness to help. We appreciate how Sino is always being proactive in helping promote and connect us to relevant players in the industry. A clear example is this very interview,” Ameen said.
You can find all of Ameen’s answers below, and you can also watch what Alessio had to say on YouTube:
What have been some of Hex Trust’s biggest successes thus far?
There’s been many over the years, including obtaining the Capital Markets Services (CMS) license from the Monetary Authority of Singapore (MAS), which was an extremely difficult and time-consuming process to go through.
Our last funding round was a big success, an oversubscribed round raising $88 million from a range of the industry’s top investors, which we were delighted that Sino could participate in. Also, watch out for our JV with Animoca Brands launching Gryfyn, the NFT wallet solution.
What are some misconceptions people have about crypto assets custodians?
A big misconception is that the only service we provide is holding digital assets on behalf of our clients. However, we have a whole range of services on top of custody, including DeFi and Staking, Brokerage and Trading, and Structured Solutions.
Another misconception is that we lend out clients’ assets from our own balance sheet. This is not the case. Client’s assets are segregated under their own name and cannot be touched by Hex Trust without permission.
What gaps still exist in the digital asset custodian space?
Back in 2018, the primary focus of a custodian was holding digital assets. These days, however, it’s about so much more. Being a successful custodian means providing an integration layer of all crypto services and connecting that to a safe, secure, and compliance-focused custody solution.
Tell us about some of the dedicated services Hex Trust offers
On top of custody, we also offer the following services:
DeFi & Staking: From the safety of your Hex Safe custody account, you can connect to the industry’s leading DeFi platforms to activate your idle digital assets. An example of this is Clearpool, where you can stake CPOOL tokens directly from Hex Safe.
Brokerage & Trading: Our trading services are built with institutions in mind. Leverage our experienced traders combined with market-leading security across deep liquidity pools of global exchanges and OTC desks covering a wide range of digital assets.
Financing & Structured Solutions: We provide high-touch tailored financing and structured solutions to meet our client's needs and help navigate the digital asset landscape to find opportunities with the right risk/return profile.
For NFTs, on top of safekeeping, you can manage your historical artwork, digital land, in-game assets and tokenized real-world assets with a dedicated NFT dashboard protected by Hex Trust insurance. Our team is here to help you acquire and sell NFTs as you explore the latest trends, collections, and worlds across the metaverse.
What innovation is left in the custody space?
There is so much. It’s not just holding digital assets anymore. It’s about building the connectivity interface on top of custody to interact with the entire crypto ecosystem seamlessly - from DeFi, GameFi, and NFTs, all via the safety of your Hex Safe account. Given the constant need to integrate new technologies, products, and services, innovation in custody will never end.
How do you imagine the future custody of crypto assets?
The future vision I see is that there will be a universal custody solution where any assets and protocols are supported, along with flexible signing, execution and deployment.
As part of this fundamental infrastructure, Hex Trust will be able to offer universal connectivity to the rest of the ecosystem, on-chain services such as staking, governance, and delegation that are interoperable across multiple chains.
All of these services would be highly scalable and accessible for institutional and consumer clients alike, designed against licensed and regulated frameworks.
What were some of the biggest obstacles you faced in establishing Hex Trust?
At the start, establishing trust (no pun intended) was the hardest thing to secure. For an institution to trust a startup, which we were at the time, to hold millions of dollars of digital assets is not an easy task.
We were confident about building the tech, but it was still early in crypto for the industry to understand the importance of custodians. Most institutions back then still wanted to hold all of their [digital assets] on an exchange. But over time, once they saw the credibility we were building for ourselves, and regulation was coming in that required certain institutions to use custodians, the sales process got easier.
What difficulties do you come across examining different regulatory jurisdictions?
The most challenging part is that the laws regarding crypto are, at best, newly issued and/or sometimes not even issued with specific regard to digital assets. This means that industry players need to refer to traditional finance regulations to seek clarity. Regulators can, in turn, take unfriendly stances on crypto because they are either unfamiliar with the topics or unsupportive of the industry.
What are some of the hallmarks of good jurisdictions?
A good jurisdiction is one which, firstly, has a clear and positive regulatory stance on crypto. Secondly, an approachable and interactive regulatory body is essential. It needs to be a two-way conversation between the industry participants and the regulators, especially given how quickly the market evolves.
What advice would you give a new entrepreneur in this space?
I’d advise entrepreneurs to ensure they’re flexible and agile with their business model and approach. The industry moves incredibly quickly with new regulations and technological advancements.
It takes time to launch a product/service, and by the time it goes live, the need for it could be obsolete or new regulations could stifle growth. Therefore, keep thinking one, two, or three years ahead. What will regulation look like? Where is it going? Will there still be a need for the product I’m building if regulation comes in?
An example of this is Hex Trust. We knew regulation was coming in, and when it did, Hex Trust would be there to serve institutional needs.
With that said, we thought banks would enter the industry slightly quicker than they have, so we ensured that we were agile in our approach to also cater for crypto institutions as well as TradFi.