MetaMask has been a well-known self-custodial Ethereum wallet in the cryptocurrency ecosystem. It features its Orange Fox avatar plugin, which acts as a portal into the world of Ether ( ETH),-based tokens and decentralized applications (DApps), and decentralized finance(DeFi).
In 2022, the retail browser plug-in wallet had more than 30 million users around the world. It has since turned its attention towards serving institutional users who are looking to increase their exposure and manage their assets in the expanding DeFi space.
Cointelegraph met Elizabeth Mathew (head of growth and partnerships, MetaMask Institutional) at the firm’s stand at Token2049 in Singapore. A Blue Fox as the backdrop was a striking change from the MetaMask logo’s orange.
MetaMask Institutional is an institution that has existed since October 2021, when large amounts of capital were being allocated to DeFi marketplaces via the MetaMask retail wallet.
This service was created to meet specific needs of institutional users. To give more operational control over a wallet, custodial access was an important consideration. This meant that responsibilities and roles could be divided for wallets belonging to entities.
Mathew explained that compliant access to DeFi was the second factor. It is controlled by smart contract and liquidity pool and has no human-controlled element.
“A unique problem is that you don’t know your counterparty in DeFi. However, we have built tools within MMI that allow you to screen a DeFi pool before and after trade.
Engagements with institutional users who had used the retail platform to manage digital assets worth millions of dollars led to the need for a particular institutional offering.
“It was astonishing, the type of risk management that we saw from institutions. They had millions of dollars worth of assets stored within their browser plugins or retail MetaMask browsers with a hardware wallet, and a spreadsheet. This was how the first crypto funds got involved in the space.
Mathew stated that the Web3 platform was not suitable for trading or DeFi organizations. However, it is appropriate for non-trading organizations as well. MetaMask now has the ability to plug in any organization into Web3 – not just fund managers or traders.
MetaMask Institutional took more than a decade to develop. Mathew described the team as having been intentional in its design not to become an asset custodian.
MMI was a result of MMI being aggregated across a few reputable custodial stacks, given that different areas of an institution’s portfolio would need different custodial techniques and techniques.
“Different organizations have different needs in relation to how they interact with Web3. Some might be high-frequency trading operations that require programmatic access and low latency. Another organization may be interested in engaging their fan base with an app suite that is completely different.”
Mathew emphasized MMI’s efforts not to be vertically integrated at its custodian layer, but rather aggregate horizontally through service providers who specialize in the governance and custodial settlement levels. MetaMask Institutional currently has 11 custodial partnerships, five of which are based in Asia. This region is where MetaMask is experiencing increased involvement.
Mathew believes that the 11 custodial partners serve over 1,800 companies from many industries. This will be a key factor in onboarding service providers and businesses into Web3.
“When people want to access Web3, they will essentially go to their facility and say, “turn on my Web3 access.” We are having conversations with institutions who think about the long-term more than we do about short-term speculative opportunities.
Who uses MetaMask Institutional?
Mathew, who has been in existence for less than a year, revealed that 250 organizations have signed up and are active on MetaMask Institutional. The 1,800 organizations that use MMI custodial services providers could also be onboarded.
Access to DeFi markets is still the primary driver of user base. However, less than half of users are companies that want operational control over token portfolios and token investments in specific projects.
“Our early adopters were DeFi-focused funds or crypto-native funds. Today, around 60% of organizations are professional DeFi portfolio manager and 40% are not DeFi traders.”
MMI has tried to keep the Orange Fox retail plug in’s DNA and feel, but with a familiar user flow that allows the user to connect any Ethereum-based DApp or its tools, MMI has been successful. Mathew explained that the difference in functionality is when the user confirms an action, which then links to the custodial wallet address.
“Depending on the governance policies you have established for that wallet, you may have a multi-approval setup. You could also have protocol level filtering.”
Mathew also noted a shift in attitudes among institutions towards cryptocurrency and their level risk appetite and exposure. Companies have never been happy with browser extension-based access. They prefer private chains.
“That’s changed. Investment banks, as well as other organizations, are now saying that they want to look at real Web3 use case scenarios. They also need to understand the operational requirements.
MMI’s integration with custodial service provider providers means that MMI does not know which one will best suit a particular institution’s needs. Users should explore the various offerings and control mechanisms on the platform. This is the best way to solve the problem.
“There is a stack to suit any use case. Just open an MMI wallet, then place some positions, even on a testnet. These are the conversations we have with institutions in capital markets.
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DeFi has been the subject of headline-grabbing events in 2022. The collapse of Terra’s ecosystem and its cascading effects through the space have made institutional investors pause before allocating large amounts of money to third-party intermediaries.
“I believe people have taken a step back when they realized that they placed trust in counterparties that were not adequately quantified. Yes, you can access the asset class via centralized intermediaries but what are the costs?
MetaMask Institutional also aims to improve the education and information that participants have before they interact with the platform in order to guide institutions towards the best type of custodial access through its partnerships.