IBM, known for pitching banks and blue-chip firms on private blockchain technology (the sector’s equivalent of alcohol-free beer) is taking decisive steps toward working with the hard stuff.

The 110-year-old computing giant is licensing its software to METACO, a Switzerland-based firm that specializes in custodying digital assets for financial institutions, the companies said Thursday. This is the business of safeguarding the cryptographic private keys that control a cryptocurrency wallet, the 21st-century version of protecting a vault full of gold bars.

Separately, Deutsche Bank, Europe’s eighth-largest bank, is enlisting IBM’s help to build its planned crypto custody and trading services offering, two people familiar with the arrangement told CoinDesk. The parties are close but no deal is signed yet.

These are not IBM’s first steps into crypto custody; Big Blue has been quietly making moves into digital asset safekeeping since at least early 2019. Most recently, IBM’s Cloud Hyper Protect was teaming up with Zug, Switzerland-based decentralized finance (DeFi) data oracle, DIA (Decentralised Information Asset). 

IBM’s further wading into these waters speaks to a broader change in the posture of corporates toward crypto. In the late 2010s, the preferred approach for banks and other large companies was to try to shoehorn blockchain, the decentralized recordkeeping method pioneered by Bitcoin creator Satoshi Nakamoto, into their processes to create more efficient databases. Like many big companies, IBM enthusiastically backed the enterprise blockchain trend, which has turned out to be a slow and relatively fruitless grind. 

Read more: NY Gov. Cuomo Announces Pilot Project Using IBM’s Blockchain-Based COVID-19 App

Meanwhile, financial institutions have woken up to public blockchains and crypto assets, and that’s where the action is, the sector’s well-known volatility and manifold operational and regulatory risks notwithstanding. Banking being the biggest client industry sector at IBM, it’s the natural infrastructure choice for most banks and large financials looking for a toehold in the growing crypto asset space. 

“Large enterprises are going to focus on where the rapid growth of demand is, and right now that is on decentralized finance services on public blockchains,” said Paul Brody, blockchain lead at consulting giant EY. “Firstly, transaction-centric banks want to offer crypto assets to their customers, and secondly, firms want to tokenize traditional assets, and plug them into the DeFi.” 

Here come the suits

The bitcoin price rally this year has caught many market participants by surprise, leaving some native crypto firms looking to improve their infrastructure, and banks scrambling to build out digital asset strategies, according to Adrian Patten, co-founder of Cobalt, a firm that’s trying to rewire crypto to work as smoothly as institutional foreign exchange trading. 

“IBM naturally sells to banks and is very well positioned,” said Patten, whose firm has also partnered with METACO around crypto custody. “A core part of providing custody is the secure management of keys. Many firms use IBM hardware for that and it’s going to be interesting to see what they do next to enhance the functionality of what’s being offered.”

Under the deal announced Thursday, METACO will protect against data breaches and cyber threats using IBM’s Cloud Hyper Protect Services and “Keep Your Own Key” (KYOK) encryption software. The solution can be offered wholly in the cloud (i.e., in IBM’s data centers), on premises (METACO clients’ servers), or in a hybrid environment, the companies said.

METACO has emerged as a go-to digital asset custody provider for banks and financial institutions, particularly in crypto-friendly Switzerland and across Europe, having provided tech to allow safekeeping of bitcoin and other virtual assets for megabanks Standard Chartered, BBVA and the Swiss-based division of Russia’s GazpromBank. 

Read more: IBM, Top Australian Banks Execute Country’s First Blockchain Bank Guarantee

Neither IBM nor METACO would make executives available for interviews. Deutsche Bank did not return requests for comment.

Hillery Hunter, an IBM fellow, vice president and the chief technology officer of IBM Cloud, said in a statement:

“As companies such as METACO continue to help the world’s top banks and exchanges manage their digital assets, IBM’s confidential computing capabilities help its clients ensure their data and processes are managed securely, bringing trust into the ecosystem and providing privacy assurance.” 

“This integration will allow us to deliver greater levels of security and trust to our clients as they innovate in the digital asset space,” said Adrien Treccani, the CEO and founder of METACO.