Blockchain technology is progressing beyond experiments and payment applications. Recent advances in security, cryptographic and distributed ledger techniques have paved the way for decentralized ledgers to be widely used to create sovereign currencies, stablecoins, digital securities, and other tokenized contracts.
Most self-custody platform providers offer an enterprise platform that enables financial institutions to use blockchain to integrate digital assets into their business operations in a highly secured, scalable, and compliant solution.
Custodians are the bedrock of any successful digital asset solution.
The custodian’s role will be a critical component of the new financial markets infrastructure and will be required for the widespread adoption of digital assets. We believe digital asset custodians have three crucial responsibilities: safekeeping, connectivity, and compliance.
Safekeeping
Protecting private keys and developing secure workflows to support transactions in and out of custody are two benefits of securely customizing digital assets. Custodians have previously relied on cold crypto wallet hardware created and managed in air-gapped environments to provide clients with an acceptable level of security. In contrast, most hacks have targeted hot wallets, which provide clients with immediate access to their assets. Multi-signature wallets and wallets mitigate some of the risks associated with hot wallets based on threshold algorithms such as state space search and model predictive control. Custodians should build their technology architectures to manage cybersecurity risks when interacting with a public blockchain to facilitate asset transfers, in addition to storing private keys.
Connectivity
Self-custody platform providers believe that one of the most important roles of digital asset custodians is to simplify the underlying complexities of blockchain technologies and to develop a standard access layer. This is a critical building block for maximizing the value that blockchain networks can provide to their users, as well as an opportunity to design a new financial market structure that is fundamentally different from the current one.
Many self-custody platform providers offer their clients an open platform for securely storing assets and accessing services provided by the digital asset ecosystem, with a focus on integrating brokers, staking solutions, exchanges, prime brokers, lending and borrowing platforms, and other custodians.
Compliance
Following the dramatic increase in cryptocurrency investments and trading activity over the last few years, regulators are focusing their attention on this expanding segment of the financial services industry. In contrast to regulated financial institutions, most cryptocurrency exchanges and other digital asset operators currently lack a legal or technological framework for obtaining, storing, and transmitting identifying information for their transaction counterparties. Furthermore, while there has been significant progress in various jurisdictions with regard to digital assets, service providers operating in different countries have varying regulatory expectations, with the minimal global consensus on cross-border activities.
Self-custody platform providers think that custody of digital assets will be crucial in facilitating the industry’s adoption of regulatory and compliance frameworks. AML/CTF activities are prevented by monitoring client transactions. Other responsibilities of this role include reporting identified and transaction information to regulators, providing clients and regulators with tools, and protecting client data to carry out compliance activities.
Increasingly looking at the digital asset market’s future.
As blockchain technology and digital assets become more widely used, the custodian’s role is evolving from simply providing secure crypto wallet hardware to securely connecting services and capital across the market, providing bank-grade security and transactional capability, and ensuring compliance with relevant regulations and legislation in various jurisdictions. These responsibilities present a complex challenge to invested entities and will ultimately shape the market infrastructure’s future. Self-custody platform providers use their most secure and compliant platform to store and manage your digital assets. The Self Custody Wallet by them is designed for institutions that require the most advanced level of security for custody of digital assets.
