TradFi institutions are increasingly building in-house digital asset capabilities or partnering with legacy custodian banks. What makes a specialised provider like zerohash a preferred choice for Tier-1 brokers and asset managers instead of building in-house?
zerohash has been offering these services for eight years — there is a lot of complexity to what we do. We work with institutions like Morgan Stanley E*Trade to support their crypto buy, sell, and hold strategies, along with Visa, Gusto, and Stripe for stablecoin payouts.
We have built tools that allow clients to convert between chains and assets, and when TradFi institutions look at building these programmes themselves, they find the cost is extraordinarily high. There is a long learning curve to key management, settlement, and 24/7 rails. Digital asset providers have been in this market and offered these services for over a decade, and I think legacy institutions are still catching up.
When groups are determining whether they are going to partner or build, we believe that zerohash can meet their risk appetites, compliance programme needs, and get them live faster. As a company, we foresee onchain infrastructure as being the backbone of the next wave of financial services. Of course, institutions will continue to use service providers like Broadridge for brokerage services and national exchanges for matching and liquidity order books. But working in parallel will be firms like zerohash, addressing similar onchain needs.
I do not think people will be talking about onchain or offchain infrastructure — it will all be a tokenised future. Some institutions will build themselves, but for the most part, they will not be building cloud computing or Amazon Web Services (AWS) infrastructure in the same way they would with legacy frameworks; they will be using partner software.
Embedded crypto infrastructure — trading APIs, custody, on/off-ramps — is becoming more standardised across the industry. As the category matures, how does zerohash differentiate and continue building durable value for partners against other infrastructure providers?
From day one, we have focused on being a compliance-first, licensing-first, and trust-first business. It is very different offering digital asset infrastructure to a startup or a neobank compared to a globally systemically important bank (G-SIB). We have built the risk and cybersecurity compliance programmes necessitated by these institutions to offer services through a vendor. Our differentiation has been the robustness of those systems and the tooling on the edge.
At zerohash, we have built out the reporting that allows for banks and broker dealers to do their required reconciliation and third-party risk management. In our view, we have an unparalleled level of breadth and depth in legacy financial institution clients.
zerohash’s strong first partners and strategic investors, like Interactive Brokers, have been instrumental in allowing us to build more robustness into our services.
If you look at the CVs of our leadership and engineering teams, we all come from TradFi institutions. People’s backgrounds are generally with clearing firms, broker dealers, and banks from the top down. All in all, this has contributed further to that transfer of knowledge and education.
As TradFi continues integrating digital assets into legacy clearing and settlement systems, how does zerohash see its role changing as the infrastructure layer that supports, rather than competes with, that transition?
I think this is where we are finding our edge right now. Most of the discussions we are having are with major exchanges, banks, and clearing houses, and what we’ve found is that a complete digital asset offering takes a lot of pieces to come together. The wallet infrastructure that we have embedded within groups like Interactive Brokers, Tastytrade, and Public allows us to expand into more onchain use cases. We have a good amount of distribution within our network that enables institutions to use the existing APIs and integrations to transition over to other infrastructure providers or financial services offering onchain solutions.
At zerohash, a lot of our external discussions span 24/7 tokenised equities, predominantly because we have already integrated and can support them as a bolt-on capability.
You also see firms like the New York Stock Exchange (NYSE), Depository Trust & Clearing Corporation (DTCC), and Nasdaq shifting their markets from 24/5 or 24/6 to 24/7. This is now the expectation for investors. Digital assets, fundamentally, are the plumbing that allows these round-the-clock markets to function. Whether it is posting collateral in stablecoins, tokenised deposits, or money market funds (MMFs), that is all powered through digital assets and the kinds of products zerohash offers.
zerohash acts as the backend for consumer fintechs, payment processors, and brokerages, among others. What safeguards and structural protections has the company deployed to maintain stability and partner trust even when an individual partner faces its own regulatory or operational challenges?
zerohash operates on a B2B2C model and takes on the licensing, regulatory, and compliance oversight of the digital asset offering. Being a licensing-first institution, we must ensure we have a strong track record with regulators. This kind of standing is important when we seek relationships with TradFi partners.
We have maintained the types of programmes you would expect at a bank: financials at the whole company and subsidiary level, stock examinations, System and Organisation Controls (SOC) 1 and 2 reporting, and ISO 27001 certification — all of which have been met and upheld at zerohash for several years now. This sort of thoroughness is not something that we are just stepping into; it is the foundation of our organisation. These are the kinds of compliance and audit programmes that TradFi institutions expect to see in their own firms.
Of course, without the demand, the robustness of your licensing does not really matter. But we have seen banks and broker dealers monitoring wires to major exchanges, such as Coinbase, and they now view it as necessary to offer a digital asset service to their clients.
zerohash operates in the US using a combination of state money transmitter licences, a NYDFS BitLicense, and a North Carolina non-depository trust company. What’s the strategic advantage of this multi-licence approach compared to consolidating under a single OCC national trust bank charter?
zerohash has maintained these licences for nearly a decade, and the simple truth is that the states were regulating digital assets well before federal regulators did. Working with the New York State Department of Financial Services (NYDFS), for example, has been a robust experience. They have a high bar, and that has made us better as an organisation — the NYDFS understands the markets and the services that we offer, and that is incredibly important to us.
The North Carolina non-depository trust company business allows us to offer traditional fiduciary services that you would see in a national trust bank, and is overseen by the NC Office of the Commissioner of Banks (NCCOB). The size and complexity of the institutions that the NCCOB oversees made it a clear choice for where we wanted one of our licensing regimes, and its experience is reflected in the services we offer today.
zerohash also recently resubmitted its Office of the Comptroller of the Currency (OCC) national trust bank charter application.
Additionally, the forthcoming CLARITY Act would place exclusive authority within federal regulators. But without it, there is a question surrounding the powers of national trust banks, and the applicability of laws like New York’s NYCRR Part 200, which establishes the BitLicense framework for virtual currency businesses. zerohash’s overall plan is to maintain robust state licensing, obtain the OCC charter, and continue to utilise our state trust, as we believe that clients deserve unquestionably licensed positions, and we are using multiple strategies to ensure that is the case.
In Europe, zerohash Europe holds an Electronic Money Institution (EMI) licence alongside its Crypto-asset Service Provider (CASP) registration. As MiCA standardises regulation across the EU, what commercial advantages do companies with both an EMI and CASP structure have?
The thinking behind a multi-licence structure boils down to ensuring that all bases are covered and there are no discrepancies. The European Central Bank (ECB) released guidance almost a year ago clarifying that there are three classifications of tokens: asset-referenced tokens (ARTs), e-money tokens (EMTs), and other crypto-assets. zerohash’s brokerage-like activity and trade services clearly fall under the Markets in Crypto Assets (MiCA) regulation. However, our stablecoin flows, arguably, could be classified under the EMI licence.
To avoid any potential regulatory mismatch or service disruption, we felt the best course of action was to follow the ECB’s guidance and obtain both authorisations.
Trade execution is handled by zerohash liquidity services, while custody sits in a separate entity structure. How does this separation improve client fund protection, especially during periods of market volatility?
This custody structure stems from our knowledge and background in regulated TradFi financial services. If you are at the Commodity Futures Trading Commission or US Securities and Exchange Commission level, you see execution regulated differently in settlement, clearing, and custody due to the potential conflict of interest that can occur when these facets are combined into one organisation.
As a result, we made the decision to have an execution platform and a matching engine where liquidity was managed and order books were held, but did not touch funds. Instead, we created an additional entity to act as the custodian, settlement agent, and settlement location for spot market activity.
This structure allows us to maintain separate boards of directors, management, policies, and procedures, all ensuring we avoided conflicts of interest and protected client assets. Both entities hold NYDFS BitLicenses, while our custodial subsidiary is also registered with the Financial Crimes Enforcement Network (FinCEN) as a Money Service Business (MSB) on top of its state money transmitter licences.
And finally, if you did not work in the financial services sector, what would your dream job be?
I have only ever been a financial services lawyer, including my first internship with Morgan Stanley, so it is hard to imagine doing anything else.
Having said that, probably a not-so-successful singer-songwriter musician, which is something I was doing in my early twenties. Folk would probably be my genre of choice.
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