The News: Crypto startup Polysign announced a $53 million Series C to expand their custody and fund administration services. Investors included Cowen Digital, Brevan Howard, and GSR. Read the full announcement here.
Crypto Startup Polysign Raises $53 Million for Custody and Fund Administration
Analyst Take: The news of crypto startup Polysign raising $53 million designed to expand their custody and fund administration warrants a well-deserved congratulations from me. Polysign continues to go from strength to strength as they deliver a much-needed solution for a widespread challenge in the crypto industry.
Polysign originally focused on just digital asset custody through its subsidiary, Standard Custody & Trust Company. While custody remains a challenge for the industry, it’s just one piece of a larger puzzle. If you’re a fund manager, you need fund administration as well.
Crypto custody is the actual securing and managing of digital assets on behalf of customers. It’s a technically challenging problem that requires sophisticated security, robust infrastructure, and nuanced access control to solve.
By contrast, fund administration focuses on the fund itself. Investors must be onboarded, compliance must ensure activities meet regulatory requirements, and reports have to be generated and distributed. At the heart of all this is cash movement and accounting – tracking investments and distributions into and from the fund is key.
Until Polysign, crypto fund managers were left to stitch together solutions themselves.
PolySign Offers a Single Integrated Services and Tech Stack for Fund Managers
PolySign offers a single integrated services and technology stack for fund managers. Rather than being forced to stitch together disparate components, PolySign offers it all in one.
Fund administration came by way of an April acquisition of MG Stover, a crypto fund administrator with over $40 billion of assets under administration at the time of acquisition. Together with the Standard Custody subsidiary, PolySign can offer fund managers a fully integrated stack from custody through accounting and investment management.
Not only does the integrated stack reduce the vendor management burden for fund managers, it also reduces operational risk. Rather than hoping that an independent fund administrator can successfully collaborate with an independent custodian, fund managers can instead rely on PolySign to execute everything. This is an attractive proposition, especially for established fund managers just beginning to move into crypto – investor Brevan Howard among them.
Time will tell if PolySign remains an independent company. Fund administration and custody are both highly concentrated industries. While the speed and experimentation advantages of a startup cannot be denied, there are material benefits for fund managers who choose to work with more established firms. Foremost among them is lower risk – big, established fund administrators and custodians are generally well capitalized and designed to be highly conservative.
PolySign’s continued growth is great for the company and the industry overall. Whether future growth is accelerated by additional capital or by acquisition remains to be seen.
Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.
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Image Credit: Polysign
Jared is an Analyst in Residence at Futurum Research, where he helps guide our practice in all things Web3, the Metaverse, and cryptocurrencies so as to help business leaders understand how they work, why they matter, and how they can not only get involved, but become market leaders along the way.
Jared previously co-founded and served as President and Board Member of Triple Point Liquidity, a blockchain-based fintech startup serving alternative asset managers, their investors, and fund administrators. Prior to Triple Point, he held multiple roles at IBM including leading Digital Assets at IBM Blockchain, leading corporate development for Industry Platforms, and founding Watson Risk & Compliance.
Jared is author and podcast co-host at Fat Tailed Thoughts and serves as a trustee for The Williams School.
Jared holds an AB from Dartmouth College.