In this article, you will learn what is a crypto custodian. By design, crypto assets are accessed through private keys. If you lose access to these keys, there is nobody who can recover your assets. There are many steps you can take to protect yourself against these losses, one of the most popular ways is by working with a crypto custodian. As the crypto industry grows, so does the demand for reliable crypto custodians.
What is a Crypto Custodian?
Crypto custody is a term used to describe the process of securing assets from theft. Custodians, third parties that can be hired to look after your crypto for you, act as safeguards of your money, be it cash, securities, gold bars or virtual assets . Custodians have been around since the 1960s and are one of the pillars of the traditional banking system.
Crypto customers are essential for the widespread adoption of digital assets. To this day, many institutional investors stay away from buying digital assets because of the lack of security. Institutions that manage large amounts of money such as hedge funds and pension funds, Family offices, are required by regulation to have a custody partner to keep their clients' money safe.
10 Criteria to Select a Crypto Custodian
Geographical location: This can provide ease of mind for some investors, and it helps if the company has more knowledge of local laws and regulations.
Regulation: There is a noteworthy difference between a regulated custodian and an unregulated one. A regulated custodian can hold regulated assets, typically has more licenses and regulatory requirements, and has more responsibilities for the assets they hold.
Assets supported: Crypto customers offer support for various crypto assets. More is not always better here. Each additional asset that is supported comes with significant work for the custody provider, which can distract from improving the overall experience for the client. It is a careful balancing act for a custody business.
Insurance: You will need to check if they have insurance for specific situations.
Track record in the industry: Some custody providers have been around for a very long time and have proven themselves to secure and transfer billions of dollars worth of cryptocurrency without problems. It is useful to look at how they handled problems when they arose as well, and what they proactively do to avoid problems such as audits.
Pricing: Crypto custodians have many different pricing structures, depending on the value of the assets you want to store or the features you need.
Technical setup: Some custody providers build and maintain their own infrastructure, others use infrastructure from qualified technology providers. It is good to understand what the setup is and if you feel comfortable with it.
Additional services: Some custody providers offer services such as staking to earn an interest on the funds you deposit, or tax tooling or portfolio monitoring. Take a good look at what you currently need or may need in the future.
Separation of funds: It is a common requirement for institutional investors that their funds can be held in a separate wallet from other clients.
Auditing: You will need to check if the custody provider is frequently audited.
Bottom Line
Therefore, cryptocurrency custody might be a profound driver for crypto adoption by empowering simple and streamlined crypto asset storage and management. This is about what is a crypto custodian.
