TechCrunch/Wikipedia

A recent survey showed that more than half of money managers plan to increase their allocations to cryptocurrencies like Bitcoin. The question is where to keep it all. 

It's not a simple matter, given the notoriety of the fledgling cryptocurrency industry, operating mostly outside the heavily regulated banking industry with a past pocked by hacks, scandals and regulatory fines. Hedge funds and other big institutional investors are unlikely to buy the digital currencies on behalf of wealthy clients and other investors unless there's total assurance that the assets are secure.  

So now there's a race on among a handful of boutique financial firms and cryptocurrency exchanges trying to establish dominance in the business of custody -- the safekeeping of assets, similar to the way a bank holds cash and electronic deposits. The firms are adding features to try to win over new investor clients and make it easier to move assets in and out -- especially critical when there's a hot trade to be made.

Gemini, the cryptocurrency exchange started in 2014 by twin brothers Cameron and Tyler Winklevoss, said that it was expanding in the custody business to cover an enlarged list of 18 cryptocurrencies, including popular Bitcoin and Ether alongside more niche offerings like Bread and Enjin.  

"The maturation of crypto as an asset class depends heavily on the safety and soundness of the custodians that hold individual and institutional funds," Tyler Winklevoss, who serves as Gemini's CEO, said in a press release. 

The New York-based company has created a mechanism allowing investors "instant liquidity" to make trades -- instead of forcing them wait hours for the verification and other procedures needed to retrieve crypto assets from "cold storage" in the offline custody operation, according to Jeanine Hightower-Sellitto, Gemini's managing director of operations. 

A separate feature lets investors grant their auditors the ability to confirm balances and transactions in a Gemini custody account -- especially important for hedge funds that need to prove they own what they're telling investors they own. 

"At the end of the day, to simplify things, it's sort of like putting your assets in a vault," Hightower-Sellitto said in a phone interview. "You want to make sure when you want your assets, they'll be there."

The point is that the cryptocurrency industry is developing its own back-office operations to support trading in digital assets, similar to the behind-the-scenes services that big Wall Street banks like JPMorgan Chase (JPM - Get Report) , Citigroup (C - Get Report) , State Street (STT - Get Report) and Bank of New York (BK - Get Report)  have historically offered to stock and bond traders.  

The banks are mostly sidelined from the cryptocurrency market, due partly to a lack of clarity around U.S. rules; the industry still faces ample skepticism from financial regulators like the Federal Reserve and Securities and Exchange Commission.

Yet neither Gemini, which is set up as a trust company and regulated by the New York State Department of Financial Services, nor its competitors are waiting for the banks to catch up.

"It takes a lot of engineering to build and maintain those systems," said Hightower-Sellitto.

Money too.