In digital assets, crypto custody is essential to protect against theft or loss of valuable assets. Third-party custodians safeguard clients' assets, shielding them from potential security threats. Unlike traditional custodians, digital asset custodians don't store assets themselves; instead, they secure clients' private keys, granting access to their funds.
Crypto custodians play a significant role in promoting the widespread adoption of digital assets, especially for institutions that manage large amounts of money, such as hedge funds, pension funds, investment banks, and family offices. Many people still avoid investing in digital assets due to security concerns. Fortunately, solutions for secure crypto custody are readily available on the market already today.
There are two main types of crypto custody: self-custody and third-party custody.
Self-custody involves managing your wallet and personally holding your private key, which gives you sole ownership and access to your funds. However, being your own custodian carries risks, as losing access to your device or forgetting your private key could permanently lose your crypto holdings.
On the other hand, third-party custodians hold clients' private keys safely and ensure the security of their assets and manageability. Worldwide, three types of third-party crypto custodians are based on financial institutions: cryptocurrency exchanges, digital asset managers, and custodial banks.
When choosing which crypto custody solution to use, it is essential to consider your needs first. The right option will depend on your investment style, the amount you hold, and your familiarity with technology.
Crypto custody with a third party can have several key benefits, including:
Overall, crypto custody with a third party can offer significant benefits for investors looking to store and manage their digital assets securely. When selecting a custodian, it's important to consider factors such as security, regulatory compliance, insurance coverage, and ease of use, among other things.
Read more about our custody services here: https://nbx.com/en/custody
This text is intended to inform and is not an investment recommendation.