Dear Joshua,

My apologies for the tardiness in my response, but the firm is entering one of its busiest periods and I have not had the privilege of as much time on this platform as I would have preferred.

Thank you for taking the time to spell out all of the technical aspects of custody of digital assets and as you can imagine, the custody providers we use already employ these practices.

Cryptocurrency exchanges such as Binance already employ Google 2FA and many cryptocurrency firms (not just mine) employ multi-sig solutions as well.

The conundrum really lies not from a technical perspective — but from a legal one.

And as you rightly point out — legal assets will need to be tied to certificates which are then recorded on an immutable ledger — i.e. the blockchain.

Yet as anyone who has worked with regulators can attest to, the legal hurdle is oftentimes the most difficult one to cross.

Regulators and lawmakers struggle with the technology and then understanding the counterparties (i.e. who can you sue?) becomes an entirely different kettle of fish altogether.

I believe (pray) that these issues will not persist indefinitely and as more and more firms embrace blockchain technology (not to be confused with cryptocurrencies), perhaps eventually regulators and lawmakers will catch up — that would certainly help speed up some of the clearing and custodying conundrums that the financial markets currently face.

I believe that it is possible. After all, not too long ago, there were whole legions of people whose only task was running across the city of New York to transfer share certificates — this has all been computerized and stored in databases — the next logical step is of course a decentralized database that automatically updates itself in real time — blockchain.

More often than not, as you rightly point out, it’s not the technical issues that hold the system back — it’s the legal ones.

I appreciate you taking the time to spell out the technical solutions to custody. Many of the firms which are now entering this space would no doubt benefit from this knowledge.

Yours,

Patrick