Global Custody Pro - 9 May 2025

OCC on Bank Crypto Custody, Apex & 21X DLT Deal, Proxy Advisor Market

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📰 Welcome to the Newsletter

Welcome to Global Custody Pro! I'm Brennan McDonald, Managing Editor. I write about the global custody industry after 12+ years in financial services, including working at a global custodian. The audio version of this newsletter is read by an AI voice. Have feedback? Just reply to this email or connect with us on LinkedIn.

Table of Contents

📠 Editor’s Comment

In today’s issue, one news item is on the OCC clarifying the authority for crypto custody at banks. This builds on the reversal regulatory posture towards crypto and digital assets in the USA.

One thing I haven’t seen much analysis of though is what this means for other countries. In the midst of trade-related drama, the nature of financial services as a form of trade through big banks operating branches in financial centres around the world, sometimes gets forgotten.

When I wrote about what US deregulation means for non-US custody banks a few months ago, there was already an indication that there’d be less regulation of financial services in the USA. Now, this is starting to spill over into other countries.

The biggest bloc to watch is the European Union. In the wake of the Draghi report, there are actions taken about actually trying to deliver the common capital markets union and tidying up regulation around the edges so that EU financial services are more globally competitive.

Smaller countries face pressure to align their digital asset regulations with a less regulated US market. This is because stablecoins enable users to easily bypass domestic exchanges in favor of decentralised alternatives with lower fees.

Institutional markets will likely remain regulated by local jurisdictions, creating opportunities for established global custody banks. Traditional banks have some advantages over emerging digital asset custodians, particularly in integrating digital assets into broader portfolios.

Global custody banks are well-positioned in this market, though they may need to streamline processes to stay competitive, especially if tokenised assets accelerate settlement times and reduce capital requirements. It’s also interesting to see some senior names at the global custody banks leave - what’s going on there?

While regulatory clarity is increasing, many operational questions remain unanswered. Progress beyond proofs-of-concept and pilot deals is needed to determine the future shape of digital asset custody.

🌏 Global Custody News

Minow Testifies: Proxy Advisor Market Competitive, Not a Cartel

  • Why it matters: Nell Minow, Vice Chair of ValueEdge Advisors and an original employee of ISS, testified before a House Subcommittee on May 6, 2025, arguing that the proxy advisory sector is not a "cartel" but a competitive market with multiple players and no significant barriers to entry. Minow stated, "There are three major players in the field of proxy advisory services and they compete vigorously," also noting the emergence of newer firms like Iconik and Shareholder Commons.  

  • The testimony highlighted that proxy advisory firms provide independent analyses as a market response to institutional investor demand, particularly to help reduce fund manager conflicts of interest. Sophisticated financial professionals, including large money managers and public pension funds, use these services but ultimately make their own voting decisions, as evidenced by instances where shareholder votes diverged from proxy advisor recommendations, such as the Tesla executive pay plan.  

  • Minow cautioned that imposing "new restrictions or requirements will only prevent new entrants from competing with the established firms," potentially reducing choice for investors. She also recommended that the Subcommittee invite proxy advisory services and their institutional investor clients to testify in future hearings to provide further perspective on the market's quality and variety.

Apex extends 21X deal, becomes first DLT listing sponsor

  • Driving the news: 21X, Europe's first licenced DLT trading and settlement system, extended its collaboration with Apex Group, which will now act as its first official listing sponsor. This initiative builds on a September 2024 agreement and aims to facilitate the listing of eligible tokenised funds on 21X's on-chain market infrastructure. 21X CEO Max Heinzle stated it will "streamline the listing process for issuers on our innovative digital asset exchange."

  • Why it matters: The partnership leverages Apex's expertise to support issuers on 21X. According to Peter Hughes, Founder and CEO of Apex Group, this strategic action "will allow a new group of investors to access institutional funds and securities that were previously unavailable to them in traditional formats.”

  • The big picture: Ahead of its launch, 21X plans further partnerships with institutional trading participants, asset managers, and market makers. The company states these collaborations "reflect strong industry momentum and will provide these partners with a significant first-mover advantage in the developing DLT-based capital markets."

TMX Launches TCS BaNCS Upgrade

  • Why it matters: TMX Group successfully launched its Post-Trade Modernisation (PTM) platform in the first quarter of 2025, representing a "major upgrade and overhaul of CDS' foundational technology" for clearing, settlement, depository, and entitlement payments. CEO John McKenzie described this on an earnings call as a "landmark achievement" and "one of the larger projects we have ever undertaken," implemented with technology provider TCS Bancs.

  • The PTM initiative delivers a "world class end-to-end solution to Canada's markets," establishing a "new global benchmark for building agile, leading-edge capital markets infrastructure," according to McKenzie. It is designed to enable further growth and power new services, including the Canadian Collateral Management System (CCMS).

  • TMX anticipates "continued challenges flare up, areas to adjust, things we need to improve on" as it navigates the PTM rollout's "hypercare period." McKenzie stated the platform is "mission critical," aims to push Canadian markets "to the head of the pack of our global peers," and positions the post-trade business for "upside growth" and new product capabilities.

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🚀 Digital Asset News

OCC Clarifies Bank Authority for Crypto-Asset Custody Services

  • Why it matters: The Office of the Comptroller of the Currency (OCC) confirmed that national banks and federal savings associations are permitted to provide and outsource cryptocurrency custody and execution services for customers. This includes buying and selling assets held in custody at the customer's direction.  

  • The big picture: This clarification, detailed in Interpretive Letter #1184 dated May 2025, reaffirms previous guidance (Interpretive Letter 1170) that crypto-asset custody is a modern form of traditional bank custody activities. Banks can engage sub-custodians for these services, provided appropriate third-party risk management practices are followed.  

  • Go deeper: Banks acting as custodians may offer services such as facilitating cryptocurrency and fiat currency exchange transactions, transaction settlement, trade execution, recordkeeping, valuation, tax services, and reporting. When acting in a fiduciary capacity, banks must comply with specific regulations (12 C.F.R. part 9 or 150). All crypto-asset custody activities must be conducted safely, soundly, and in compliance with applicable law.  

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