Safe digital asset ownership is a universal right. sFOX is proud to support this right through its new bankruptcy protections for clients of sFOX SAFE: sFOX’s premier custody solution, brought to you by SAFE Trust Company, the first regulated and insured digital-asset-only trust company chartered by the State of Wyoming Division of Banking. Try it for yourself now.
Recent failures of financial service providers in both traditional and decentralized finance have demonstrated that custodians need to be better stewards of their clients’ assets and hold themselves to a higher standard of excellence. We aim to pave the way for this standard with a custody product that gives ownership back to the clients: empowering them, not their providers, to lend or sit on their assets as they see fit.
The Digital Asset Class Needs Self-Regulation
To understand the current growing pains of digital asset services, you need to imagine what the dot-com bubble would have been like if every website and company had been a new financial asset.
Global technical innovations like the internet are almost always like the Wild West: by creating new, borderless products and services, companies often adopt the philosophy of “build fast and break things.” It’s one thing when those innovations are the first websites, offering services like pet food, but when every innovation is a new asset unto itself, things can get volatile.
For other asset classes, organizations have stepped up to regulate themselves, working alongside self-regulatory organizations; FINRA, for example, is an SRO in the equities market. At sFOX, we take that to mean that it’s on us to set responsible standards for financial services operations in the digital asset sector: the full potential of crypto cannot be realized until we excise the corporate volatility from the ecosystem, regardless of asset volatility. And we don’t have to start from square one, either: we want to set the right standards for digital asset management by bringing in the battle-tested safeguards from other industries, including bankruptcy-protected custody, to create a solution that’s better for customers than the sum of its parts. In this way, we suggest a different startup philosophy more appropriate for financial institutions: “build fast and don’t break things.”
Understanding Asset Custody Options
The problem of storing assets and custody is not a new one: it exists in every asset class, and the solutions almost always involve trade-offs.
One option that may seem tempting is self-custody, the choice to retain maximum control over your assets, but this choice comes with substantial operational overhead that can overwhelm many individuals and new ventures. The establishment and enforcement of proper controls, workflows, and infrastructural standards can require a steep investment of time and specialized labor, effectively requiring you to build out a whole new line of business for the sole purpose of holding the assets involved in your primary business.
A second option is to rely on a depository institution or a traditional exchange to hold the asset for you, but these entities often lend those assets out whether you like it or not. That may increase the risk for you depending on their risk management practices, which are often appallingly opaque to the end user. You also face the risk of timing misalignments: cases where they don’t have your assets available for you at the moment when you need them.
In both of these cases, you also have to understand how passwords can be recovered and how assets can be transferred in case of change of ownership.
Custody always seems like a compromise between being efficient and secure: if you want both, the cost of implementation typically increases. That’s why we decided to make something better available for every digital asset investor in the world.
sFOX SAFE: Bankruptcy-Protected Digital Asset Management for All
At sFOX, we’ve been working for almost a decade to build the seamless prime brokerage experience that financial service professionals demand. sFOX SAFE offers the caliber of custodial service that traditional finance takes for granted, and which we believe should be table stakes for digital asset management: $200 million in insurance coverage, SOC 2 compliance, regular third-party auditing and testing—and now, bankruptcy-protected coverage.
Bankruptcy-protected custody enables protecting client assets from creditor claims in the unlikely event of custodian insolvency or bankruptcy. We believe that this offering represents the first step in bringing professional custodial standards to the digital asset sector, protecting not only your assets but also your ownership over those assets—even from the entity with which you choose to custody them. This is why our custody affiliate, SAFE Trust Company, was established in Wyoming: Wyoming state law uniquely makes possible the bailment structure which allows clients to custody their digital assets without relinquishing legal ownership (see Wyoming Statute §34-29-104(d)), and SAFE Trust Company is the first trust of its kind to make this custody structure available to investors.
We reject the notion that exposure to crypto requires a trade-off between transaction efficiency, fund security, and price. We want all serious digital asset managers, and their clients, to benefit from these protections, so we’re offering them free of charge for up to $250,000 in assets under custody.
While many market participants have grown accustomed to using different solutions for digital asset transactions and digital asset custody, with costly time required to move assets between the two, we’ve built a single point of access to encompass everything you need from asset management—all while building the liquidity and order infrastructure to bring the price of transactions down in the bargain.
Here are key points to better understand how sFOX SAFE’s bankruptcy protections work:
- “Bankruptcy-protected” means your assets are legally excluded from the estate of SAFE Trust Company in the unlikely event of its insolvency. This means, for instance, that the company’s creditors would have no claim on your assets, so you can trust that your assets remain yours even if the company holding them disappears.
- sFOX SAFE holds your digital assets in bailment. This is like giving a valet your car at a restaurant: when you do so, you don’t transfer ownership to him. Just so, you can take advantage of the protections provided by sFOX SAFE without ever surrendering ownership of your funds.
- sFOX SAFE is different—and arguably better—than putting your money in a bank. A bank client’s assets are liabilities of the bank: when a client transfers an asset to the bank, they transfer the property and only have a claim to those assets. This means that only insurance solutions protect you in the case of a bank’s becoming insolvent. By contrast, SAFE Trust Company’s legal structure ensures that your digital assets remain your property even while in custody, and therefore safe from bankruptcy proceedings in the unlikely event of SAFE Trust Company’s insolvency.
sFOX SAFE is fully integrated with sFOX’s digital asset management platform, allowing clients to trade across all major exchanges, automate workflows, manage reporting, and customize account permissions, all from the same account they use for custody. For all the technological benefits of decentralization, a “decentralized” approach to digital asset custody and transaction only leads to friction in operating your business; sFOX has removed that friction while maintaining the provably highest regulatory standards since Day 1.
In 2023, it’s entirely possible to enjoy the full benefits of digital assets without taking on undue operational risk for yourself or your clients. Try sFOX SAFE now, and experience the difference of next-generation asset management made for traditional asset managers.