G4S, the UK security company, has launched its first foray into the nascent crypto sector with a new digital currency storage service.
The FTSE 250 company, which runs prisons and detention centres and also stores cash for large companies, said on Wednesday that it had developed a custody service for cryptocurrencies that would protect the assets from criminals.
A lack of secure storage options is considered one of the main barriers to the institutional adoption of cryptocurrencies, which have long been the target of hackers.
G4S said it had already started providing the service to an unnamed cryptocurrency exchange based in Europe.
“The [crypto] sector has attracted the same old threats for financial systems including robbers, scammers, market manipulators and many others,” Dominic MacIver, senior risk analyst at G4S’s risk consulting division, said in a statement.
“Our innovative security solution helps protect against some of those threats by taking the assets offline and storing them in high-security vaults.”
Carbon Black, the US cyber security company, estimated that about $1.1bn worth of cryptocurrency was stolen in the first half of this year. That includes the $500m hack of Japanese exchange Coincheck in January. Tracing stolen coins is difficult because most cryptocurrencies are held anonymously.
Criminals have also kidnapped individuals in order to extort their crypto wealth from them.
The crypto custody sector has begun to flourish recently, with traditional players entering the space alongside specialised outfits.
US investment giant Fidelity this week announced plans to offer “enterprise-quality custody” of cryptos to institutional investors, as well crypto trading services. In May, Nomura said it was developing custody services, while Goldman Sachs, Northern Trust and JPMorgan Chase have said they are exploring similar services.
Cryptocurrency holders access their funds using a unique “private key”, a long alphanumeric password that serves a similar purpose to a bank card PIN. It is this key that must be protected from thieves.
Many of the digital coins stolen to date have been kept in so-called “hot wallets”, online customer accounts that are connected to the web and therefore more vulnerable to hacks. But custodians are increasingly developing so-called “cold storage” services, where private keys are kept on a hard drive, separated from the internet.
The new G4S “secure vault storage” service, which will be available globally, uses technology to break up the digits of a private key into fragments. They can then be put on storage devices in closely-guarded vaults in undisclosed locations.
Mr MacIver said this meant they would be “out of reach of cyber criminals and armed robbers alike”.
G4S said it would charge clients based on how many different offline storage devices they wanted to use to store their private keys, and that it would use its own existing vaults for the service, rather than building new facilities.
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