Why this 59-year-old security firm thinks your crypto belongs in its vault

Tucked near the entrance of an unremarkable trading estate a few miles from London’s Heathrow Airport you’ll find an equally unremarkable warehouse. Inside, once you’ve negotiated a series of sturdy metal doors, you’ll find yourself among long racks neatly laden with mysterious plastic-wrapped packages.

Look closer, however, and you’ll glimpse a dull metallic sheen amid the plastic sheeting: stacked silver ingots.

This is the London vault of 59-year-old security firm Malca-Amit, one of seven such facilities spread around the world, from Singapore to New York. Nestling in one corner of this surprisingly airy space is the bricked-off inner vault, where the really juicy stuff is held: gold bars, jewels and — since the final months of 2021 — cryptocurrency.

While the majority of the world’s crypto still sits on exchanges or in personal wallets, a growing share is moving to dedicated custody platforms offered by the likes of Coinbase and Gemini. And traditional security firms including Hong Kong-based Malca-Amit and London-based G4S — more used to delivering bullion in armored cars — are attempting to muscle in on a market valued at roughly $100 billion by The Block Research. 

Value density

Malca-Amit’s vault is much less vault-like than you might expect. Across an area spanning three tennis courts you’ll find a dozen racks stacked five meters high with silver. Each wrapped pack of ingots contains a metric ton, worth a little over $1 million. And there are hundreds of them. 

Asset storage is a game of value density. The silver ingots weigh about 35kg (77 pounds) each, making just one a struggle to carry any distance. The sheer mass needed to store only a modest value is a major hurdle to any would-be thieves.

But a kilogram of gold or jewels is much more valuable, hence the need for a second vault-within-a-vault. And these precious items have recently been joined by an even denser store of value: digital assets.

Those able to sneak past the multiple layers of security — from electric fences to laser-triggered alarms — will now find cold-stored crypto in Malca-Amit’s inner vault, packed in sturdy plastic cases a little smaller than a shoebox.

Inside these boxes are credit-card-sized metal swatches produced by Ballet, a crypto wallet startup founded by serial entrepreneur Bobby Lee. These cards, costing between $35 and $99, are imprinted with the private key needed to access the associated crypto wallet. Anyone getting hold of the code on the card would be able to transfer crypto wherever they wanted, making them akin to bearer assets.

Malca-Amit declined to share the value of crypto assets they store, citing security concerns. 

This “deep cold” storage keeps the keys well away from the internet, where they’d be vulnerable to hacking. Instead, this method is akin to writing your private key on a scrap of paper — except these metal cards are more durable and fire-resistant. 

Malca-Amit is far from the only security firm to scent profit in storing digital assets. Gibralta-based banking app Xapo was giving journalists tours of its bunker in the Swiss Alps back in 2017, Britain’s G4S has been offering offline storage since 2018 and 162-year-old US security giant Brink’s recently announced a partnership with Swiss custody firm Metaco.

Persistence of the physical

The appeal of these vault-based storage offerings comes down to one word: insurance.

By stashing keys in secure vaults, Malca-Amit is able to obtain top-notch insurance from Lloyd’s of London, the world’s biggest insurance market. These venerable firms understand the concept of insuring bearer assets held in vaults. For them, covering this form of crypto is like covering a diamond or a bearer bond certificate: it’s all part of the so-called specie insurance market, which is named after the archaic word for coin. 

Should crypto keys be stolen from the vault, insurers would pay out the full value — as they did following the famous 1983 heist at the nearby Brink’s-Mat facility. 

“We offer full liability coverage as our storage service is insured in the reputable London insurance market,” explains Mark Titmarsh, Malca-Amit’s head of digital assets.

So what’s the catch? Why doesn’t everyone store their precious crypto like this? 

For a start, there’s cost. Malca-Amit’s clients pay an annual fee of about 0.8% for storing crypto and up to 1% for non-fungible tokens (NFTs) — with valuations appraised by a third party to keep the insurers happy. That’s more than the 0.5% or so charged by Coinbase for its custody services. 

The second issue is liquidity. By deliberately removing their crypto from the internet, Malca-Amit’s clients can’t quickly sell their investments should the market mood suddenly sour — as it did in early May when Terra’s luna token lost almost all its value in a matter of hours. Titmarsh freely admits that these services are designed for long-term holders rather than active traders, and estimates that it would take at least six hours to gain access to a stored key in the best-case scenario.

Josh Schwartz, formerly COO of rival institutional crypto custodian Curv (which PayPal acquired last year) and now CEO of a custody-focused startup that’s yet to leave stealth mode, points out that these delays introduce a different kind of risk. The product that Curv developed secures private keys using a cryptographic technology called multi-party computation. 

“Cold storage — including hiding funds in deep bunkers with armed guards — helps mitigate cyber risk and potentially some physical theft, but the tradeoff is utility,” Schwartz told The Block. “What do you do if you need immediate access to funds to capture a market opportunity, sell if it's tanking or meet operational needs like settlement?” 

Still, Malca-Amit clearly sees a role for its strongrooms and armored cars for digital assets. Managing Director Charles Turner is keen to point out that "innovation needs security" and — according to crypto-focused insurer Evertas — less than 1% of crypto is currently insured, creating a huge market opportunity.

The firm also argues that its services complement crypto-native custodians like Coinbase, rather than competing with them. 

“We are happy for custodians to plug and play our service so that they can increase their coverage for the digital assets that they manage,” Titmarsh says. 

Ultimately, Malca-Amit’s impressive London facility is a reminder of the persistent physical underpinnings of global finance — even while most users’ experiences now come via a laptop screen or smartphone app. 

The vault is a key node in a global network of banking and payments services that still relies on precious metals sitting securely on racks, ready to be audited by their banker owners.

And whenever the world of finance is ready to abandon lumps of shiny metal in favor of long strings of alphanumeric characters, firms like Malca-Amit will be waiting.