Organizations Will Need Data Management Solutions for Embracing Digital Assets

Interest from institutions in digital assets is on the rise. By the conclusion of Q1, over 900 U.S.-based institutions had reported spot Bitcoin exchange-traded fund (ETF) holdings surpassing $100 million, totaling $10.7 billion collectively.

Moreover, prominent asset management companies such as BlackRock and Franklin Templeton have introduced tokenized treasury funds. Recent statistics reveal that more than $1 billion in treasury notes has been tokenized on public blockchain platforms.

A bi-annual survey by KPMG in Canada also indicated that institutional investors in the area significantly increased their cryptocurrency holdings in 2023. KPMG’s findings show that 22% more financial services firms provided crypto asset products and services to clients last year compared to prior years.

A total of 937 financial institutions disclosed their Bitcoin ETF holdings in Q1 2024.

In comparison, Gold had only 95 firms participating in its initial ETF quarter! pic.twitter.com/hwoLkTKYnw

— Guru Vedas (@VedasGuru) May 16, 2024

Institutions Require Enhanced Data Management Solutions

Despite its significance, managing digital asset data remains a challenge for institutions.

Isabella Henderson, Director of Product Strategy at Amberdata, informed Cryptonews that digital asset data is intricate and multifaceted.

“Every crypto exchange employs distinct tickers and numerous asset instruments,” Henderson stated. “This inconsistency poses challenges for institutions in terms of reliability.”

She noted that in traditional finance, standardized security masters and asset references address these issues by aligning the front, middle, and back offices.

However, she emphasized that the digital asset sector lacks such solutions, leading to a disjointed perspective of the crypto landscape for institutions.

An Open-Source Master Security Database for Digital Assets

To address this issue, Amberdata has recently introduced an asset reference and classification tool. Referred to as “ARC,” this is a security master database designed for institutional use in the digital asset realm.

A security master database serves as a repository containing reference data about financial products. Market participants utilize such a tool to manage their records across trading, risk, clearing, and settlement activities.

Asset Reference and Classification Methodology

Asset Reference and Classification (ARC) is an institutional-grade security master database for digital assets that seeks to offer a transparent and robust framework for the digital asset market to facilitate effective regulation,… pic.twitter.com/sfyD3t7PuZ

— Amberdata (@Amberdataio) May 16, 2024

Henderson explained that ARC is an open-source dataset that allows financial institutions to categorize and consistently view the digital asset sector.

“By integrating reference details, classification, and categorization, ARC provides transparency into the operations and applications of any digital asset,” she noted.

Integrating Crypto Data Sets

Henderson elaborated that ARC integrates the front, middle, and back offices for institutions managing digital assets. This integration is achieved through data collected by Amberdata, which monitors traded crypto pairs across over 150,000 spot, options, and futures instruments.

“ARC displays token addresses, contract and trade specifications, price limits, exploits, and more,” Henderson stated. “ARC IDs also correlate an asset’s related instruments throughout the digital asset ecosystem, employing a tagging classification system to flexibly categorize industries and appropriate use cases.”

Henderson believes that this tool can assist institutions with analysis and reference, trading, and other applications.

“For instance, ARC will aid institutions in maintaining records of the rapidly evolving digital asset landscape with a repository of precise asset and classification information for reference and analysis,” she said. “It can also enhance execution workflows to improve trade execution strategies.”

Data for Assessing Digital Asset Risk

Institutions also need data management tools to assess the risks linked to digital assets.

A recent survey by Deloitte indicates that executives managing digital assets anticipate an increase in risks and a more complex regulatory environment this year.

Tim Davis, a principal at Deloitte Risk and Financial Advisory and U.S. Blockchain Leader, asserts, “Digital asset risk should be a regular agenda item for any organization that actively engages with digital assets in its operations.”

In light of this, a Chainalysis representative informed Cryptonews that institutions could utilize Chainalysis on-chain data to assess risks associated with digital assets.

“For example, we can assist clients in understanding how widely distributed an asset is, its liquidity, which segments of the crypto economy are holding and utilizing it, and whether those segments lean towards being illicit or risky,” the representative stated.

Will Institutions Adopt Digital Asset Management Tools?

As digital assets constitute a relatively new sector for institutions, it remains uncertain whether data management tools will be adopted immediately.

Nonetheless, Henderson mentioned that Amberdata anticipates institutions will begin utilizing ARC in the future.

“We have received feedback from numerous financial institutions and crypto-native firms – both clients and non-clients – that mapping assets across exchanges and markets is a significant challenge throughout the trading life cycle,” she remarked.

Henderson added that Amberdata has already started the ARC integration process for several institutions. She also noted that because ARC is open-sourced, it will evolve within the digital asset industry through community contributions and insights.

“There is a large community of financial professionals and digital asset investors who will contribute to ARC, ensuring the dataset remains relevant and current, and eliminating proprietary biases in classifying digital assets,” she stated.

However, challenges may emerge. Sebastian Higgs, Chief Operating Officer and Co-founder of Cordial Systems – a provider of institutional-grade self-custody software – informed Cryptonews that while transparency benefits public blockchains, there are significant concerns for institutions aiming to develop products on blockchain infrastructure.

“They must still comply with customer data privacy laws, confidentiality, and will want to keep certain processes or business logic private rather than making them publicly accessible,” Higgs explained.

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