How to choose the right custodian for your organization

How to choose the right custodian for your organization

February 22, 2023

Navigating the digital asset space comes with its own set of unique challenges, particularly around the lack of security. To top it off, the downfall of FTX et al. proved that secure custody isn’t just about protecting your assets from theft or loss, but also from misuse.

For institutional investors in particular, a lot more is at risk. To ensure the full protection of their assets, choosing the right counterparties with industry knowledge and expertise is a must.

While there are many custody providers in the digital asset space, choosing the right one is a different story. It all boils down to trust, and who is given the trust to safekeep your organization’s assets. But how exactly do you make such a decision?

Choosing the right custodian for your organization requires a holistic evaluation of not just one, but several aspects: security, trust, accessibility, and connectivity to name a few. Here are several key considerations when deciding on your trusted custodian.

Consideration #1: Security

  • With what technology do they secure client wallets? 
  • Where do they hold private keys? 
  • Do they hold SOC1/SOC 2 certifications? 
  • Who can access wallet accounts? 
  • Do they offer different wallet types? 

Consideration #2: Trust

  • Where are they regulated? 
  • Do they receive regular auditing? 
  • Do they hold insurance coverage for theft, loss or misuse?
  • What happens to funds in the case of the custodian’s bankruptcy?
  • Do they work with notable partners?

Consideration #3: Accessibility

  • Can transactions be conducted on demand?
  • Do they provide verifiable real-time fund monitoring/records?
  • Do they allow account structure and access customization to fit organizational needs?
  • Are clients’ wallets all segregated? 

Consideration #4: Connectivity

  • What type of digital assets do they support? 
  • Can assets under custody be used for staking, trading or financing? 
  • Can I participate in on-chain governance? 
  • Will I still have access to forks and airdrops? 

Hex Trust’s digital asset custody solution

Hex Trust is a fully-licensed and insured provider of bank-grade custody for digital assets. Our utmost priority is to ensure full protection of our clients’ digital assets, and we do so by putting our clients at the forefront of all our operations. We do things the right way – by obtaining licenses in the jurisdictions we operate in, adopting rigid security measures and processes, providing insurance for additional safety, and more. Find a full overview of our regulation, security, and compliance practices here

Understanding the digital asset space moves at a pace unmatched by any other industry, Hex Trust is also dedicated to helping our clients stay ahead of the curve. Based on client interest, we support a broad range of digital assets including crypto, NFTs, security tokens, and more, as well as DeFi connectivity to a range of Web3 ecosystems. We commit to client-tailored solutions and respond to our clients’ needs in a timely manner.

This also means serving tailored custody solutions to best suit their organizational needs. We offer a range of custody models, both for long-term investors as well as more frequent traders. 

For long-term investors with only an occasional need to trade, Hex Trust offers cold wallet solutions. Funds can be moved to an exchange’s trading wallet only when a trade is to be made, and with the proceeds of the trade moved back to the security of the client’s wallet immediately after the trade has settled. 

For more frequent traders, moving assets between wallets may not necessarily be practical, and other models can be used. Some options currently used or considered to increase asset security include: 

  • Escrow account model into which assets from both sides of a trade are transferred, effectively creating a single clearing counterparty between the two sides of a  transaction.
  • Application programming interface connectivity between exchanges and custodians that enables a client to make a selected part of their wallet available to an exchange for trading purposes, with the ability to return assets outside the reach of the exchange once a trade has settled. This enables clients to deal with multiple exchanges from a single wallet. 
  • Cross-chain services involving wrapping/unwrapping of specific products or positions where the principal assets are held in custody and a synthetic representation of the asset is traded, with settlement of the actual asset occurring on a net basis periodically during the day. 

About Hex Trust

Hex Trust is a fully-licensed digital asset custodian that provides solutions for protocols, foundations, financial institutions, and the Web3 ecosystem. We have offices in Singapore, Hong Kong, Dubai, Italy, and Vietnam.

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