Zodia Custody's ADGM Unit Can Now Hold Digital Securities

Zodia Custody's subsidiary in Abu Dhabi Global Market can now hold digital securities. The Financial Services Regulatory Authority approved a Variation of Permission for Tungsten Custody Solutions Limited, expanding the existing Financial Services Permission it holds to include custody of digital securities.

A Variation of Permission changes the scope of an existing licence. Tungsten Custody Solutions already held a Financial Services Permission in ADGM. The FSRA's decision extends that authorisation to digital securities rather than creating a new one.

Digital securities custody is not the same as holding crypto. It covers tokens that represent conventional instruments, including equities, fixed income and commodities. Zodia Custody will start with tokenised money markets. The move takes the firm beyond crypto assets and into tokenised versions of traditional securities.

ADGM is a financial free zone in Abu Dhabi with its own civil and commercial framework. The FSRA licenses and supervises firms there. Custody of digital securities will sit alongside the traditional custody and fund administration work the zone already hosts.

Phil Langton is the senior executive officer of Tungsten Custody Solutions. He said interest in putting conventional equities and fixed income assets onchain is rising. Langton cited an expectation that tokenised real-world assets will grow to $16 trillion by 2030. He added that the firm is positioned to handle safekeeping and settlement for both digital and conventional assets with partners in the region.

Richard Clark, chief executive at Zodia Custody, said the approval allows the company to offer custody for tokenised securities and tokenised commodities in ADGM to standards used by banks. He expects demand for both to rise across the region.

Zodia Custody forecasts that tokenised equities will reach US$750 billion by the close of 2028. That projection assumes institutions keep moving traditional instruments onto distributed ledgers.

Banks and asset managers are doing exactly that, shifting listed shares and other conventional securities onto blockchain rails. They will need a regulated custodian authorised to hold the onchain versions. The ADGM approval widens the range of assets Zodia Custody can hold for clients there. It also adds to permissions and registrations the group's entities hold across Europe, the Middle East and Asia-Pacific.

The bottleneck for tokenisation is moving from issuance to custody. Plenty of platforms can create a tokenised fund or bond. Fewer firms are licensed to safekeep the underlying instrument inside a regulated jurisdiction. A bank that wants to settle a tokenised security needs a counterparty that can hold it without stepping outside the regulatory perimeter. The custody piece is less visible than token issuance, but it determines whether trades can settle. ADGM has spent years building that framework, and the FSRA's decision puts another custodian into it.

The first test will be money markets, where Zodia plans to begin. Starting there makes sense: short-term instruments settle often and are easier to standardise. Tokenised equities may follow, but only if regulated custody can keep pace with issuance.