Big Blue wading deeper into those waters speaks to a broader change in the position of corporates toward public blockchains.
IBM, known for throwing banks and blue-chip firms on private blockchain technology (the sector’s equivalent of alcohol-free beer) is taking critical steps toward working with the hard stuff.
The 110-year-old computing giant is licensing its software to METACO, a Switzerland-based company that specializes in custodying electronic assets for fiscal institutions, the companies said Thursday. This is the work of safeguarding the cryptographic private keys that control a cryptocurrency pocket, the more 21st-century variant of protecting a vault filled with gold bars.
Separately, Deutsche Bank, Europe’s eighth-largest bank, is enlisting IBM’s help to construct its intended crypto custody and trading services offering, two people knowledgeable about the arrangement advised CoinDesk. The parties are close but no deal is signed yet.
These are not IBM’s initial steps into crypto custody; Big Blue has been softly making moves into digital asset safekeeping since at least early 2019.
IBM’s further afield into these waters speaks to a wider change in the posture of corporates toward crypto. From the late 2010s, the preferred way for banks and other large companies was to try to shoehorn blockchain, the decentralized recordkeeping method pioneered by Bitcoin creator Satoshi Nakamoto, into their processes to produce more efficient databases. Like many large companies, IBM enthusiastically backed the enterprise blockchain fad, which has turned out to become a slow and relatively simple grind.
Meanwhile, the financial institutions have awakened to people blockchains and crypto resources, and that’s where the action is, the sector’s well-known volatility and manifold operational and regulatory risks notwithstanding. Banking being the largest client industry sector at IBM, it is the organic infrastructure alternative for the majority of banks and large financials looking for a toehold at the growing crypto asset area.
“Large enterprises are going to focus on where the rapid growth of demand is, and right now that is on property fund services on people blockchains,” said Paul Brody, blockchain lead at consulting giant EY. “Firstly, transaction-centric banks want to provide crypto assets to their customers, and secondly, firms wish to tokenize conventional assets, and plug them to the DeFi.”
Here come the matches
The bitcoin price rally this season has captured lots of market participants by surprise, leaving some native crypto companies seeking to improve their infrastructure, and banks scrambling to build out electronic asset plans, according to Adrian Patten, co-founder of Cobalt, a firm that’s attempting to overthrow crypto to operate as easily as institutional foreign exchange trading.
“IBM obviously sells to banks and is well placed,” said Patten, whose company has also partnered with METACO about crypto custody. Many firms use IBM hardware for this and it’s going to be interesting to see what they do to improve the performance of what’s being offered.”
Under the deal announced Thursday, METACO will shield against information breaches and cyber threats using IBM’s Cloud Hyper Protect Services and”Maintain Your Own Key” (KYOK) encryption program. The alternative can be provided wholly from the cloud (i.e., in IBM’s data centres ), on premises (METACO customers’ servers), or in a hybrid environment, the firms stated.
METACO has emerged as a go-to digital advantage custody provider for financial and banking institutions, especially in crypto-friendly Switzerland and across Europe, having provided tech to allow safekeeping of bitcoin and other virtual assets for megabanks Standard Chartered, BBVA along with the Swiss-based branch of Russia’s GazpromBank.
Neither IBM nor METACO will make executives available for interviews. Deutsche Bank didn’t return requests for comment.
Hillery Hunter, an IBM fellow, vice president and the chief technology officer of IBM Cloud, said in a declaration:
“This integration will enable us to deliver greater levels of security and trust to our clients since they innovate from your electronic asset space,” said Adrien Treccani, the CEO and founder of METACO.