Zodia Faces an Unclear Path as Standard Chartered Moves Forward with Traditional Finance Crypto Custody

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Zodia Faces an Unclear Path as Standard Chartered Moves Forward with Traditional Finance Crypto Custody

Bitget-RWA2025/11/25 15:02

By:Bitget-RWA

- Standard Chartered partners with 21Shares to offer crypto custody, signaling TradFi's deeper integration into digital assets. - Zodia Custody's uncertain future highlights competitive pressures as crypto-native custodians face challenges from traditional banks. - Legal risks and a credit downgrade complicate Standard Chartered's crypto expansion amid regulatory shifts like Japan's asset segregation rules. - Industry trends show traditional banks leveraging reputation and compliance to compete with crypto

Standard Chartered

Bank

has taken a major step into the cryptocurrency sector by forming a partnership with 21Shares, a prominent issuer of crypto exchange-traded products, to deliver digital asset custody solutions. This alliance represents a notable change in direction for the bank, which had previously depended on Zodia Custody—a crypto-focused subsidiary it helped establish in 2020—prompting speculation about whether Zodia will continue to play a role or be replaced

according to reports

. The collaboration highlights the increasing convergence of traditional financial institutions (TradFi) with the crypto industry, a movement that has gained momentum with the involvement of major players like

US Bancorp

and

Citi

, both of which have recently broadened their digital asset services

according to data

21Shares’ choice to collaborate with Standard Chartered instead of Zodia underscores the mounting competition facing crypto-native custodians. Mandy Chiu, who leads global product development at 21Shares,

highlighted the bank’s strong reputation

in international banking and risk management as a significant benefit. The new custody platform from Standard Chartered, operating out of Luxembourg, fits into the bank’s broader plan to provide institutional-grade digital asset infrastructure.

Zodia Faces an Unclear Path as Standard Chartered Moves Forward with Traditional Finance Crypto Custody image 0

The bank also introduced a crypto trading platform in July, allowing institutional clients to trade leading cryptocurrencies

according to reports

Nevertheless, Standard Chartered’s expansion into digital assets is complicated by ongoing legal issues. Recently, a court in Singapore allowed a $2.7 billion lawsuit to proceed against the bank for its alleged involvement in the 1MDB fraud case, which saw $4.5 billion misappropriated from Malaysia’s sovereign wealth fund. The bank has rejected the claims and intends to challenge the ruling

according to reports

. In a separate development,

Moody’s revised the bank’s credit outlook

from “positive” to “stable,” pointing to operational risks associated with its global operations and market exposure. These factors may affect Standard Chartered’s standing as it seeks to attract institutional investors to its crypto offerings.

The move toward custody solutions from established financial institutions reflects larger trends in the industry. Traditional banks are leveraging their regulatory know-how and established reputations to compete with crypto-native companies. For instance, Citi has recently teamed up with Coinbase to enhance digital asset payment services for institutional customers, focusing on fiat gateways and payment management

according to reports

. Such partnerships are designed to connect the worlds of traditional and digital finance, giving clients access to the strengths of both sectors.

The agreement between 21Shares and Standard Chartered also comes as regulatory environments are evolving. Japan’s Financial Services Agency (FSA)

intends to require liability reserves

for crypto exchanges, mandating that user assets be kept separate and safeguarded in the event of insolvency. These steps are meant to strengthen investor trust, which is increasingly important as institutional participation in crypto grows.

Although the future of Zodia Custody is still uncertain, Standard Chartered’s entry into crypto custody marks a crucial development for the sector. As established banks increase their involvement with digital assets, they bring both trust and heightened scrutiny, influencing the direction of a market still facing regulatory and operational hurdles. The results of this shift will likely determine how traditional and crypto-native firms interact in the coming years.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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