Custody Software for Digital Assets and Cryptocurrency

Widely used by individual holders, private keys and online wallets are vulnerable to hacks, which makes these solutions too risky for institutional investors. The other important reason for the existence of cryptocurrency custody solutions is regulation. Owners of cryptocurrencies and other digital assets will increasingly rely on crypto custody providers such as banks and other financial services firms to store their assets. In that sense, the distinctions between crypto and other types of financial assets will blur or even disappear. Investors will expect custodians to manage their crypto just as they expect custodians to manage their other financial assets. Service providers storing digital assets on behalf of customers can easily qualify as third-party custodians.

What Are Cryptocurrency Custody Solutions

On the downside, it takes time to generate liquidity from a cold wallet because of its offline nature. All centralized cryptocurrency exchanges take care of their customers’ crypto custody. Some crypto exchanges and platforms outsource their security crypto exchange software solutions needs to an external custody provider that safeguards the assets under management. In any case, it’s worth knowing that when you set up an account and hold assets on a centralized exchange, you do not hold the private keys to your exchange wallet.

Yes, cryptocurrency is the talk of the town but there remains so much to learn about it. Simply speaking, custody services are storage solutions for your cryptocurrency. The centralised exchanges used to buy, and exchange cryptocurrencies have provided some essential custodial services as the exchange holds the wallets. Security issues with hot wallets that we mention below illustrate the limits of merely setting up shop and building the technology as you go. An exchange, though, is primarily focused on liquidity, whereas a custodial solution will be more focused on security. Some larger exchange platforms are adapting by adding either third-party custodians or registering themselves as custodians.

Only when the key is needed to sign a new transaction is it assembled from its different slices, held on different devices. The full key only exists for a fraction of a second in a secure computing environment. Last week, the Ethereum DeFi ecosystem surpassed $100 billion in total value locked. Sign up for Crypto Markets Today, our daily newsletter explaining what happened today in crypto markets – and why. In some cases, you can earn interest from the crypto you deposit by staking or lending through the third-party custodian. Coupled with issues of scalability, HSMs may not be the right solution if you’re looking to handle faster and more complex transactions.

As a strong blockchain and DeFi infrastructure builder, Cobo provides SaaS (Software-as-a-Service) products such as WaaS (Wallet-as-a-Service), DaaS (DeF-as-a-Service)i), NaaS (NFT-as-a-Service) and Argus . Later that year, BNP Paribas experimented with Trade Finance platform eTrade Connect, powered trade platform TradeIX and live trade transaction blockchain platform Voltron. In April 2017 BNP Paribas Securities Services revealed that is was utilizing blockchain tech for a funds distribution platform.

Why is a crypto custodian necessary?

Ease-of-use remains a critical factor, and a distinction became popular amongst early crypto-enthusiasts with “hot” wallets providing a better user experience and “cold” wallets bringing significantly higher security. And so with crypto, there’s no way of changing the locks if the key is lost or compromised. These reasons converge so that, as we’ll see in this blog, trusting an entity with safeguarding your crypto-assets is an appealing prospect. The isolation of key shards creates a significant barrier for bad actors to try to access your assets. To reach your private key information, these actors would need to effectively identify and exploit each intermediary.

Custody in particular, will play a fundamental role for organizations seeking to access crypto and DeFi. They are paramount to organizations safely acquiring and holding crypto assets. For many institutional investors, it’s imperative that their cryptocurrency assets are placed in separate storage from other clients. Not all custodians offer this feature, so it’s an essential criterion for selecting your crypto security partner.

What is a custodian?

Interest rates of up to 30% annually are offered; multi-currency and varied tenors are also available. Withdraw at your leisure and hourly compounding, and you can earn up to 6% APY. Borrow USDT or USDC to acquire crypto and convey a bullish stance on the price of BTC, ETH, BCH, and LTC.

What Are Cryptocurrency Custody Solutions

However, due to online exposure, hot storage options are more vulnerable to hacks. As discussed, self-custody is when you personally hold the private key for your own wallet. This means you are the only one who can prove ownership of your funds and access your holdings. Being your own custodian means having complete control over your wallet, but it also means you bear all the risks too. If you lose access to your physical device or forget the private key, your crypto will most likely be gone forever. While the internet connectivity provides much more convenient access to your crypto, it comes with commensurate risk.

Different Organizations, Different Requirements

Additionally, the overall design and operating effectiveness of Circle security procedures is verified via multiple assessments. Whether you’re an institutional or individual investor, broker, exchange, payment service provider, corporate or token issuer, we speak your language. Token Issuers For private placement token issuers wishing to bulk disburse tokens and streamline treasury management. When you need access, Cobo Custody provides effective protection for your cryptocurrency. Single points of failure are eliminated with Casa’s multi-location security approach, devised by Jameson Lopp . Casa Covenant guarantees that when the time comes, your loved ones will receive their bitcoin securely and safely.

  • Digital asset custodians do not technically store any of the assets because all data and transactions exist on a public ledger called the blockchain.
  • Fortunately, custodians and investors no longer need to choose between security and speed.
  • Online wallets are a possible answer, although they have also been shown to be vulnerable to hacking.
  • The owner verifies each transaction by digitally signing it with their private key.
  • Coinbase is recognized as one of the top cryptocurrency space players due to its unconventional approach to running regular audit operations.

How are custody solutions an important aspect for the growth of the crypto ecosystem? One of the foremost answers for this question would point towards the growing interest of financial institutions, hedge funds, and individuals with a high net worth in cryptocurrency. As of August 2021, the total capitalization of the crypto market was over $2 trillion, which clearly shows the value of crypto for the world. The applications of digital assets like cryptocurrencies are influencing conventional financial services.

Extra services

Members of the global settlements network can pay each other in numerous currencies, cryptocurrencies, and stable coins. Instantly transfer money with no transaction fees or limits, 24 hours a day, seven days a week. To acquire access to your keys hypothetically, an attacker would have to compromise at least three separate entities.

Mobile wallets are very similar to web wallets except for one crucial difference – the private key is only stored on the user’s mobile device. Open-source Cryptocurrency & Digital Assets Exchange platform facilitates the trading of stocks, digital assets, and cryptocurrencies. For institutional investors, this simplicity translates into greater operational efficiency. Less time and effort are required to manage a portfolio of digital assets. Well, the primary responsibility, no matter how small or large your funds, is to protect your private keys and backups.

What Are Cryptocurrency Custody Solutions

The validity of each transaction request is ensured at every stage of the approval process by a thorough transaction verification procedure that includes multi-role authorization and automated behavioral analysis. Private keys are segregated, stored, and encrypted in a Hardware Security Module and are never handled directly by day-to-day operators. The vendor enforces policy before using its key share to prevent a compromised customer sending funds to arbitrary addresses. To produce a valid signature, both the customer and commercial provider must agree to do so, and use MPC to create it.

Why Does Crypto Need Custody Solutions?

The solution is white-labeled and can be integrated into any service or product. Their clients get a sophisticated solution for warm and cold wallets via API combined with the German crypto custody license. At Avaloq, they see a clear path towards developing crypto and blockchain technology for financial institutions and their clients. To get there, we’re working with AlgoTrader technology to connect crypto brokers and exchanges. That’s in addition to making room for crypto key custody integration – based on Metaco SILO – and more seamless functionalities that will allow for delivery of compliance solutions.

Crypto Custody Solutions for Organizations Entering the DeFi Space

Arkane Network is a crypto custodian based in Belgium that has adopted a genuinely unique approach by providing services to the gaming and finance industries. It supports several blockchains, including gaming-related ones like Tron and GoChain. Arkane Network caters to both B2C and B2B, which means increased flexibility. Another feature that makes Arkane Network stand out is the support of non-fungible tokens.

The company offers superior-quality hardware wallets to securely store its clients’ cryptocurrency assets. Coinbase is recognized as one of the top cryptocurrency space players due to its unconventional approach to running regular audit operations. The platform offers its users greater flexibility in managing crypto by enabling them to stake their digital assets directly from the cold storage. Put simply, cryptocurrency custody solutions are third party providers of storage and security services for cryptocurrencies. Their services are mainly aimed at institutional investors, such as hedge funds, who hold large amounts of bitcoin or other cryptocurrencies. The solutions generally incorporate a combination of hot storage, or crypto custody with connection to the Internet, and cold storage, or crypto custody that is disconnected from the Internet.


For crypto brokers, crypto exchanges, banks, corporates, lending and cryptocurrency trading platforms, liquidity, payment or staking providers looking to protect clients’ assets with secure, compliant crypto custody. The only Multi-Party-Computation security platform for digital assets is FIPS 140 L2 certified. You may design multi-party risk-based approval policies that correspond to local legislation using Unbound’s Crypto Asset Security Platform , and you can integrate HSMs and offline signers into one MPC-based platform.

The solution features proprietary, hardened security protocols protecting online assets from attacks that are commonly launched on digital wallets. All digital assets, including cryptocurrencies, security tokens, utility tokens, and NFT custody, are supported. The exchange and your assets are always safe thanks to multiple levels of platform security and 100% crypto asset cold storage. Thousands of institutions and financial intermediaries trust Fidelity today. With Fidelity Digital Assets, the company has expanded its capabilities to provide a dependable and safe platform for this developing asset class.

These are key actions that cryptoasset custodians and aspiring organizations should start doing today to build a sustainable business model in this emerging financial ecosystem. Adds new assets to any portfolio quickly and easily, without requiring the usage of any hardware or the management of blockchain infrastructures. Provides a safe platform for investors to trade, borrow, lend, and custody of digital currencies.

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