Custodiex participates in the European Blockchain Sandbox

The European Blockchain Sandbox has announced the selected projects for its second cohort after a competitive selection process. The 2024 application period attracted nearly 60 entries from various sectors across the EU/EEA.

Among the participants for selected projects is Custodiex - a portfolio company of Symvan Capital's SEIS and EIS funds - which is part of the 2Tokens Hosted Wallet Service for non-crypto-asset tokens.

2Tokens Hosted Wallet Service, along with 19 other use cases, showcases the diverse and high-calibre innovations in the blockchain space across different EU/EEA regions and industries. The continued interest and participation underscore the vibrant growth and potential within the European blockchain ecosystem.

Further reading: Hosted Wallets Services for non-crypto-asset / non financial related tokens

The use case involving the 2Tokens consortium, along with Amdax, Celebratix, Custodiex, Metaseum, TDE (OnYourMarks), and CMS, pertains to the unclear regulatory status of hosted wallet services for tokens that are neither financial products nor crypto-assets as defined under MiCAR.

Tokenization, commonly associated with crypto-assets, also has numerous applications beyond financial products and services. Companies like Celebratix, Metaseum, and TDE utilize this technology to provide non-financial and non-crypto-asset tokens, such as concert and museum tickets, proof of attendance tokens, and fan engagement points, in their services. Typically, their clients are unaware that Distributed Ledger Technology (DLT) powers these offerings. By incorporating wallets into their applications, often through hosted wallets, these companies effectively provide hosted wallet services for tokens unrelated to financial or crypto-assets.

Although the primary service of these parties is related to non-financial or non-crypto-asset tokens, the integrated wallets can technically receive, hold and transfer crypto-assets. Also in the transfer of the tokens they are offering it is very well possible that they need to have cryptocurrency in thosehosted wallets to pay transaction fees. In this way, Celebratix, Metaseum and TDE, could be seen as CASPS while their tokens are not crypto-assets nor financial product related.

This situation could lead to significant regulatory and operational costs, potentially making it unfeasible for these companies and others in the industry to compete with non-blockchain/DLT competitors. Such a scenario poses a substantial threat to all use cases involving non-crypto-asset and non-financial product tokens.

The consortium partners Amdax and Custodiex offer regulated hosted wallet / custodial services. Through this use case, they jointly want to explore if white label hosted wallet services can be offered, e.g. in a light regime, or exemptions for non-crypto-asset tokens are possible so these companies can offer their services level playing field. If not, although products are alike, based on technology, non-crypto-asset companies using tokens are under regulatory oversight but their competitors who use other technologies are not.