Today ING announced that it has spun out its post-trade solution for digital assets, Pyctor, which provides decentralized custody and settlement for institutions. In a multi-million dollar deal, the technology has been acquired by GMEX, a provider of institutional trading technology and the tech partner for TP ICAP’s digital assets offering.
“After spinning out Stemly last year from ING Labs Singapore, Pyctor has been another innovation success story at ING Neo,” said Olivier Guillaumond, Global head of innovation Labs & Fintechs, ING.
Pyctor’s solution enables digital asset private keys to be fragmented and spread amongst blockchain nodes hosted by regulated institutions, using multi party computation (MPC). The offering supports both public and permissioned blockchains.
Previously several institutions participated in UK regulatory sandbox trials of Pyctor, including ABN AMRO, BNP Paribas Securities Services (BNPPSS), Citibank, Invesco, Société Générale – Forge, State Street, UBS and others. Three of the participants are top five global custodians. Some have now gone in other directions for custody. For example, Citi and SocGen Forge recently announced they’re using Metaco, and State Street is working with Copper.
Why GMEX bought Pyctor
Hirander Misra, CEO of GMEX, acknowledged that it’s buying a proven minimum viable product rather than a live network. For GMEX, one of the benefits is the synergies with its existing solutions – particularly GMEX MultiHub – and its own client base. There’s also the possibility of partnering with some of Pyctor’s pilot participants, but that remains to be seen. Additionally, there will be an ongoing collaboration with ING’s Digital Assets team.
“There is a need for a secure MPC-based network where institutions can settle effectively between them,” said Misra. Another appeal of Pyctor is that this isn’t just any solution. It’s one that was developed from the start with the security standards that regulated institutions expect.
And as crypto regulations come into force, some will struggle with compliance. One of Pyctor’s products is Pyxis which provides a solution for compliance with the FATF Travel rule for AML, enabling regulated DeFi. Coming from a TradFi background, Misra believes it’s far easier to go from regulated asset classes into crypto than the other way around.
He also views a technology provider such as GMEX as a good home for Pyctor. “One institution running a network on behalf of others doesn’t necessarily scale to the (same) extent as when it’s neutral,” observed Misra. “When it’s neutral, everyone sees it as theirs.”
GMEX is ten years old and started in traditional finance, developing exchanges, matching engines, clearing, settlement and custodial solutions. It got involved in digital assets in 2017 and has multiple offerings, including its MultiHub solution, which supports both traditional and digital assets. It’s a network of networks service, removing the need to integrate with multiple venues. The multiasset support is consistent with the company’s mission to bridge the traditional and digital asset spaces.
TP ICAP, the world’s largest interdealer broker, is GMEX’s highest profile digital assets client. GMEX is helping TP ICAP develop a spot crypto trading platform that launches later this year. So far, it has integrated with Fidelity Digital Assets, Flow Traders, and Hudson River Trading. And for custody, it’s linked to Standard Chartered’s Zodia, Nomura’s joint venture Komainu, and Galaxy Digital’s BitGo.
Last month GMEX announced a major funding round – $20 million equity, and $5 million debt – led by Burkhan’s Tempus Network and will close shortly.
Regulated institutions stick together
The Pyctor and TP ICAP examples show that larger regulated institutions prefer to deal with other regulated institutions operationally and to mitigate various risks. Meanwhile, in the last month, multiple central bankers have stated that the crypto crash has not impacted traditional finance because of the limited interconnectedness. That’s something that’s starting to change at the asset level. But until crypto firms become more substantially regulated, it seems larger institutions prefer to stick to a separate playground.