(Bloomberg) — In the traditional investment world, asset safekeeping is a pretty boring business, albeit a crucial one: Keeping clients' stocks and bonds safe is a pretty simple job.

However, in the nearly $2 trillion cryptocurrency market, a favorite playground for hackers and scammers, custody is anything but boring. As a result, the service costs up to 10 times more than custodial for traditional assets such as securities and cash, according to Hadley Stern, chief commercial officer for custody tool Solana Marinade, who previously led digital asset custody at the Bank of New York Mellon Corp. making it a potentially attractive growth area for startups as well as Wall Street banks and other firms looking for ways to expand into digital assets.

Domestic crypto firms such as Coinbase Global Inc. and BitGo Inc. have been among the dominant service providers until now, with traditional financial companies largely in a holding pattern due to the regulatory uncertainty surrounding digital assets. While it is now only a $300 million market, the business remains attractive with participants such as Fireblocks Inc. who estimate that the sector is growing by about 30% per year.

“New entrants are betting that this market gets significantly bigger,” said Campbell Harvey, a finance professor at Duke University.

BNY, State Street Corp. and Citigroup Inc., some of the world's largest custodial banks, have made initial crypto custody efforts or expressed interest.

Custody has been controversial since the earliest days of crypto, when many participants adhered to the phrase “not your keys, not your coins.” The term arose from the fact that only those who possessed the encrypted keys to open digital wallets actually controlled the assets.

While escrow firms have helped reduce the risk of theft and reprisals, the missteps continued. Just this month, as retail brokerage Robinhood Markets Inc. and investment firm Galois Capital reached settlements with US regulators, at least in part over failures related to crypto custody. Robinhood said it has since fixed the issues.

“Both cases highlight how important qualified custody is for institutional investors,” said Tim Ogilvie, global head of institutional at stock exchange Kraken, which also provides custody.

So far, Wall Street's efforts have been full of fits and starts. BNY DESIGNATED its digital asset storage infrastructure in 2022, but has yet to expand the effort. In 2023, Nasdaq Inc. halted its crypto custody ventures.

However, companies are moving forward with evidence, with many plans revolving around protecting tokenized assets. JPMorgan Chase & Co. runs a project called Onyx, which allows blockchain payments between bank customers, for example. In December, Depository Trust & Clearing Corp. acquired Securrency to offer products for tokenized traditional financial assets. In August, State Street selected Taurus tokenization and custody provider for digital asset services.

“This partnership would provide us with the technology foundation to offer, subject to regulatory approval, digital asset custody services once the regulatory climate, particularly in the US, becomes more favorable,” said Donna Milrod, head of digital asset solutions. on State Street.

A major issue that is hindering established financial entrants is a US Securities and Exchange Commission rule, known as SAB 121, that makes it impractical for highly regulated financial firms to provide custody of cryptos. President Joe Biden vetoed congressional efforts to overturn it. Some banks have received exceptions to the rule.

In one September 9 speechan SEC official highlighted specific examples of when agency staff have allowed entities to not comply with SAB 121 and explained why. Still, others fighting to get exemptions are awaiting the results of the U.S. presidential election to see if Donald Trump returns to the White House and makes good on his promise to replace SEC Chairman Gary Gensler with a regulator who will to fully open the door to crypto.

“Although the SEC has begun to provide relief under SAB 121 to banks, it has not done so in a transparent manner that applies across the board,” said David Portilla, a partner at Davis Polk & Wardwell LLP who represents banking clients and crypto. “The technological, legal and regulatory risks cited by SAB 121 are significantly mitigated by the existing and extensive legal and supervisory framework applicable to banking organizations, yet the SEC's policy does not reflect this.”

Even overseas providers are making plans for a potential regulatory change. After cutting back last year, London-based Copper is considering a new focus on the US market if Trump wins.

“It's just that, depending on the outcome of the election, it could happen faster or slower,” said Bobby Zagotta, chief executive of crypto exchange Bitstamp USA, which uses BitGo for custody. “Wall Street's major players won't miss an opportunity, especially if it signals an evolution of the traditional services market.”