Overview
The Custody function service in FinP2P is a an asynchronous and decentralized method that allows enables custodians to provide services to other FinP2P organizations , that offer investment opportunities to their clients (such as broker dealers, exchanges and banks), by acting as the custodian for their Investor's digital assets.
The Custody Service will provide a secure and reliable system for the safekeeping of an investors investor's financial assets (e.g a digital securitysecurities), ensuring that Investors assets are segregated, protected and managed in an efficient and transparent manner. The Custody Service will maintain accurate records of all assets under custody; the cryptographic materials related to keeping those assets; protection of assets from unauthorized access; approval of instructions from the account holders and regulatory reporting as required, ; and balance and information inquiries. It will also allow asset managers to provide various services to the their end Investors, using the custodial FinID custodied by them, such as distribution of dividends.
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To facilitate and orchestrate the custody process and the various use cases around it, we are adding a provider type to the network - the Custody service nodeRouter. A Custody service node Router exposes to the FinP2P network a set of interfaces that allows the Investors to select a custodian service and operate trades on those assets under custody through other FinP2P Owner/Investor nodesenable Owner (trading) services (such as broker dealers, banks and exchanges) to approve them, and offer them as a segregated custody service to their clients. The custody service responsibilities include:
Facilitating a Connect to custodian Custodian process, to onboard Investors on a custody wallet and associate it with the owner Owner FinP2P Profile on the Owner Nodethe Owner (trading) Router. This process ensures that the owner is indeed the same owner that was onboarded by the Owner (trading) service (such as a broker dealer, bank or exchange) and therefore has the same certificates, such as KYC/AML.
Approve and Sign FinP2P Transactions for the Investor Investor’s asset trades.
See and report on the Investor asset holdings and balances.
Facilitate Transfer of assets from an existing FinID identity to new custodian FinIDanother FinID managed by the chosen custodian.
Facilitate the process of re-associating the custody FinID account to a different Investor profile on a new Owner Node (trading) Router in case of Node Router “termination” (such as in the event of a broker dealer bankruptcy).
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To enable this option, an Owner’s Profile Resource, which originally supported a single FinID, will now be upgraded to support multiple FinIDs, which can be associated to other custody service organizations.
This means an asset will see two types of FinP2P services associated with every owner:
The Owner (trading) service - managed by the Primary Router of the owner. This is the service that provides certificates for the Owner, presents investment opportunities to the owner, and will enable the owner to initiate trades.
Typically a Broker Dealer, bank, exchange etc.
Verifies the investors and their credentials.
Offers investments opportunities and assets to investors
Manage the investment and trading processes
Helps investors see their offerings across all custodians and assets classes.
The Custody Service - the FinID of the Owner for that specific asset - managed by the financial institution’s Router that provides the Custody service.
Typically a Custodian
Keeps the investors assets segregated from the Owner (trading) service and secured via the FinID wallet address management.
Manages the approval and signature process for transactions initiated at the Owner (trading) service. This includes 2FA, multi signatures, hardware based security, or any other security measure.
Provides various custody solutions to the client (but not broker dealer services and trading).
Each of the two service Routers will be entitled to receive some information from the asset, depending on their role.
Private Key Management
Private keys are crucial for accessing and transferring digital assets. The custody service node Router should securely store private keys and only allow authorized parties to access them. Multi-signature schemes can be implemented to ensure that multiple parties must agree before a transfer can be made.
User Interface
The custody service node Router should provide a user-friendly interface for users to manage their digital assets. This can include features such as approving asset transactions, account management, transaction history and reporting, and any other traditional custody service.
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Investors associates a custodian provider (The Custody NodeRouter) with their owner profile on their Owner Node(trading) Router. (Note: the trading node Router is the institution where the investor is exposed to finding and researching new assets, trading etc , such as a broker dealer, bank exchange, etc).
Once the new FInID is approved, it is associated with the Owner Profile Resource by the Owner Node(trading) Router.
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Diagram depicts the interaction between the Investor, the Trading Platform and the Custody Service for associating a custody provider with an owner profile on the FinP2P Trading NodeRouter. A request is sent to the custody provider to connect the investor owner profile to the custodian account with a designated FinID for the owner. A connect approval process is coordinated with the user to connect the custodian account, validate and approve it. At the end of the process, the FinP2P Profile of the investor on the Trading Node Router is connected to the FinId of the investor managed by the Custodian. |
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This process is using the standard FinP2P processes for transferring assets between FinIDs. The asset Node Router can know that both the source the destination FinIDs belongs to the same Owner profile, as the Profile Resource ID is provided with the transfer request.
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Diagram depicts the interaction between the Investor, the Trading Platform, the Custody Service and Asset Node Router for moving an existing FinID with tokenized asset into a custody provider FinID account. A request is sent to the custody provider to connect the investor owner profile to a new custodian account with a designated FinID for the owner. A connect approval process is coordinated with the user to connect the custodian account, validate and approve it. Then a transfer process is started to move assets from the original FinID to the new designated FinID at the custodian. Asset nodes Routers will be able to identify that this transfer is between FinIDs of the same investor and handle the transfer operation accordingly, resulting in a new receipt approving the update. |
Custody
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providers access to information from the asset service
FinP2P provides permission to request and access information based on the Profile ResourceID of the owner, which means the trading service (such as the broker dealer) can have such information. Once we introduce a Custody provider, the custody service should ALSO be able to access information related to the assets belonging the the FinID managed by them.
This will be achieved by updating the Owner’s Profile with multiple FinID’s - each with it’s associated Custodian. So, when a custodian requests information from the Asset, the asset can verify that the Custodian is indeed the manager of the FinID associated with the Investor.
Owner
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(trading) Router (example: Broker-dealer) termination
FinP2P will provide a process of re-associating the custody FinID account to a different owner profile on a new Owner Node (trading) Router in case of Node Router “termination” (such as in the event of a broker dealer bankruptcy).
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Introducing a new Service on top of the FinP2P network to provide custody capabilities for various trading nodesRouters. Adopters of the new Service API will be required to support a set of new operations:
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