In the first part of this article, we looked at the issues inherent in crypto storage, and what an ideal solution to these issues looks like. Now, let’s look at how BANKEX Custody Service handles users’ assets.

First Things First: KYC

The first step in BANKEX Custody Sevice is KYC. This stands for Know Your Customer, and implies exactly that — you will need to provide identifying information, just as you would to a bank.

Anonymity and untraceability were a major ideological driver of the development of cryptocurrencies. However, the fact is that crypto is an asset, and if you care about keeping your assets, you have to declare that they are yours. We ask you to provide identifying information because we need to keep your crypto safe from everyone who’s not you, while simultaneously allowing you to restore access to your Custody account if you lose or forget your login credentials.

An important facet of using Custody is that there’s no need for private keys or seed phrases. No need to memorize cryptographic credentials, engrave them on metal, or keep a piece of paper in a safe. You use an account name, password, and 2-factor verification.

If you forget your password or lose access to your second factor, we will ask you to confirm your identity in ways that cannot be faked with current technology. This is why the KYC procedure is so important — it allows us to restore your access to your crypto assets, as well as have you confirm large withdrawals personally.

Deposit — Encryption and Cold Storage

Once you’ve gone through the identification process and connected your second factor, you deposit your crypto into Custody.

At this point, your client record and the crypto are separated.

Your client records go into a 256-bit encrypted database, with cloud backups on three continents. An automated module creates separate wallets for each of your cryptocurrencies, generates a private key for each wallet, and writes these private keys to the above-mentioned database, with no human involvement. The database itself cannot be accessed or read by a human — everything is encrypted and handled within the machine environment. The server is in a human-free area, accessible only by BANKEX’s automated modules.

The crypto goes into cold storage. Our cold storage is air-gapped, in a secure facility, and can only be accessed on a set schedule. The only way crypto assets can move out of cold storage is with two layers of authorization, and only to whitelisted addresses.

Withdrawal — Verification & More Verification

The wallet addresses in the client record database serve as the whitelist for withdrawal from cold storage. Before your crypto can be moved out of Custody, it has to be transferred from cold storage to your Custody wallet.

You log in with 2-factor authorization and place a withdrawal request. The withdrawal request is examined by our automated system.

Small withdrawals with unproblematic logins are approved automatically. Large withdrawals, logins from strange locations, and other suspicious factors cause the withdrawal request to be flagged for human review.

The withdrawal is first reviewed by an account manager. The account manager can send you a confirmation email, call you, or ask you to send in a selfie with your ID (or some combination of the above).

Once the account manager approves the withdrawal, the withdrawal request is sent to another human, called an Officer. The Officer sits in a different location than the account manager, and has no direct communication with them, thus eliminating the possibility of collusion.

The Officer’s job is to examine the blockchain for signs of suspicious activity, so as to make sure that the client making the withdrawal is indeed the client.

If a withdrawal request was automatically approved, but the blockchain shows signs of unusual activity by the client, the Officer may send the withdrawal request back to the account manager for re-authorization by the client. The Officer may also ask the account manager to ask the client for stronger verification than the account manager had originally asked for.

Once both levels of human authorization have been passed, your crypto assets are withdrawn from cold storage to your Custody wallet.

Now you can do with them as you please — place them on an exchange, use BANKEX Escrow to conduct business, buy tokenized assets from BANKEX’s tokenization platform, or support your favorite social media personalities using MediaToken. You can play, trade, and invest on the blockchain, knowing that your crypto savings are being held securely by BANKEX Custody Service.

BANKEX Custody is more than a service. It’s a working security solution for long-term storage of crypto-assets. It is scalable and reproducible, so we plan to license it to financial institutions as they get into the crypto asset sphere.