Custodians play an important role in the institutional adoption of digital assets, as the service provider dedicated to safekeeping the digital assets of financial institutions, digital asset organizations, and corporations. The lack of robust security infrastructure in the digital asset world means secure custody is even more important than for traditional financial assets.
Just like custodians in the traditional finance world, digital asset custodians operate on a set of principles to ensure that client assets are fully protected from start to finish. A fully licensed and insured professional custodian will have rigid processes and measures in place when safeguarding client assets.
Professional custodians operate on 10 core foundational principles:
Asset segregation is the best practice to protect clients’ assets. A professional custodian will always keep clients’ assets completely segregated from its own.
A professional custodian will normally offer approval methodologies designed to match clients’ preferences regarding segregation of duties, transaction limits, and approval types.
Professional custodians have a strong focus on tailored client support, always seeking a deeper understanding of its clients’ needs and business model.
Professional custodians provide value-added services tapping into use cases in the decentralized economy such as staking, borrowing, and lending protocols. Before being offered to clients, services are subject to extensive internal reviews.
Just like banks, professional custodians have robust processes in place to safeguard clients’ crypto assets, supplemented by an insurance safety net to cover the unlikely event of asset loss.
Before appointing any third-party providers, professional custodians fully ensure that a detailed due diligence process is followed.
A professional custodian will benefit from operating in jurisdictions where there is an applicable regulatory framework to which it can conform.
A professional custodian will maintain its own team of risk management and security specialist s, analyzing and assessing both internal and external risks to ensure that customer assets are protected with the commensurate level of security.
Professional custodians will normally offer different wallet options and account structures in which to hold clients’ assets, depending on the nature of their business and the way in which they use their assets.
A professional custodian will ensure it can maintain business continuity even if its principal business location is unavailable for any reason such as natural disaster, power outage, or other force majeure incidents.
Download the full PDF to learn more about each principle, and why exactly they matter to any institutional investor looking towards digital asset custodians.
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.