The article below was originally posted on Asset Servicing Times on 20/08/2025.
Paul Frost-Smith, co-CEO of Komainu, talks to Karl Loomes about Series B funding, institutional adoption of digital assets, and why crypto-native custody is no longer on the fringe
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It has been a year of change for Komainu.
In May, the firm announced a US$75 million strategic investment led by crypto infrastructure heavyweight Blockstream — the first and only Series B deal to be funded entirely in Bitcoin, according to co-CEO Paul Frost-Smith.
“It was a transformational deal,” says Frost-Smith. “Not only was the investment made in Bitcoin, but we also now run that Bitcoin as part of a treasury management operation. There is a lot of talk in the market right now about treasury management in Bitcoin — we are doing it privately, and already.”
Beyond the funding, Blockstream’s involvement also has direct technological implications. One of the most significant is the integration of its Liquid Network — a Bitcoin sidechain — into Komainu’s infrastructure. “That will massively reduce the latency on our off-exchange settlement services,” says Frost-Smith. “What now takes four hours could soon take two to four minutes. That will be a class-leading service when it goes live — likely in Q4.”
Expanding the offering
Founded in 2018 and now with offices in Jersey, the UK, Dubai, Singapore, and soon Italy, Komainu has always positioned itself as a crypto-native provider with traditional finance (TradFi) discipline.
Custody lies at the heart of its model — but with a growing range of services on top.
“We brought bank-grade governance, control, and supervision into the crypto space,” Frost-Smith explains. “Custody is the foundation, but on top of that we offer staking, off-exchange settlement, and soon lending and collateralised services.”
The goal, he says, is to evolve toward a prime services model for digital assets. “Clients want more than secure custody. They want to borrow against their assets, or use them as collateral. These are things we take for granted in TradFi — now we are bringing them to crypto.”
From fringe to financial mainstream
Institutional acceptance has accelerated significantly in the past 18 months. The launch of US spot Bitcoin ETFs, led by the likes of BlackRock and VanEck, has had an outsized impact on Komainu’s client base. The firm is already working with a number of ETP issuers in Europe.
“There has been a real shift,” says Frost-Smith.
“ETFs brought credibility. Suddenly you had major institutions endorsing what had previously been considered fringe. That drives huge demand for secure, compliant custody.”
A second trend is the growth of so-called ‘Bitcoin treasury’ firms — companies raising equity capital to accumulate and hold Bitcoin on their balance sheets. “We are seeing significant uptake from this segment,” he adds. “These are serious businesses, and they need serious custodians.”
A maturing market
Despite this momentum, Frost-Smith is quick to note that digital assets remain a young market. The fallout from 2022 — and the collapse of FTX — served as a brutal purge, clearing out low-utility tokens and retail speculation. What remains, he says, is a more serious, more institutional environment.
“Custody in this space is not trivial,” he says. “These are bearer assets in digital form — more like commodities than securities. You are not just registering ownership, you are physically securing value. The cybersecurity and operational demands are enormous.”
While stablecoins are now being explored for cross-border trade and settlement — “a key area we are watching” — the broader move toward tokenisation is likely to take longer. “Eventually, anything in registered form will move on chain,” he believes. “It is just a more efficient way to operate — but the tech, the legal frameworks, and the infrastructure still need to catch up.”
Collaborating with TradFi
As traditional institutions warm to digital assets, some are looking to partner with firms like Komainu. “We have had interest in white-labelling, but our preference is to provide sub-custody,” Frost-Smith explains.
“We plug into their systems and act behind the scenes, without interacting with their clients directly.”
This approach, he says, is often more practical than full integration. “A lot of TradFi institutions are running on pretty antiquated tech — legacy systems patched together over decades. We are cloud-native and built from scratch. Sub-custody lets us deliver our services without getting tangled in their infrastructure.”
As for whether traditional custodians will eventually converge with crypto-native ones, Frost-Smith believes it is likely — though the form that takes remains unclear. “Some will build in-house. Some will buy. But as tokenised assets grow, the pressure to have that capability will become irresistible.”
Looking ahead
With a growing presence in Asia and an eye on the US — “we are watching closely, but still waiting for regulatory clarity” — Komainu is expanding fast. But Frost-Smith remains focused on serving a specific segment: active asset managers, hedge funds, and institutions serious about Bitcoin.
“That is where we are strongest,” he says. “We are particularly close to Blockstream, and we are much more skewed towards Bitcoin than altcoins. Our clients are serious about this asset class — and they need custody that is just as serious.”