The rising popularity of cryptocurrency and digital assets and the growing interest of institutional investors to hedge their treasuries are great signs that crypto custody services are bound to be high in demand. It means that cryptocurrency custody solutions will serve as the bridge between the traditional investment market and the evolving cryptocurrency ecosystem. The transfer of wealth from owners to their heirs is also picking up speed and custodial solutions are needed to address this phenomenon.
Cryptocurrency custody services are autonomous storage and security mechanisms that hold different quantities of coins and tokens. These are innovative fintech solutions that are attracting the entry of institutional investments into the crypto space as these institutional investors and hedge fund managers hold vast amounts of Bitcoin and other cryptocurrencies. Custody services are essential third-party providers of the crypto industry as they safeguard and secure cryptocurrency and digital assets. They employ solutions in storage that are either “hot” or “cold”.
Hot storage is the holding of crypto assets in a system that is connected to the Internet. This means that the coins and tokens can be easily accessed and offers liquidity although the risks are higher since hot storage can be vulnerable to cyberattacks. Cold storage moves crypto assets away from any online exposure to mitigate or eliminate hacks and cyberattacks but offers exceptionally low liquidity for quick transfer of funds on short notice. The combination of cold and hot storage is called a vault storage wherein most of the funds are kept offline and using a private key is the only way to access it.
Theft and hacks abound on the Internet working on accessing crypto wallets, attacking cryptocurrency exchanges, and stealing private keys. At times users lose the physical custody of their private keys and passwords and other risks associated with storing digital wealth personally. Crypto wallets let the owner handle their own funds, empowerment that most would want to have. But the downside resides in the stress of personal responsibility as to the guarantee of safety especially of large volumes of cryptocurrencies. Therefore, the need to avail of custody services comes to the fore.
The SEC regulation now demands that institutional investors holding customer assets worth more than $150,000 are required to store it with qualified custodians. Institutional investors include banks, savings associations, registered broker-dealers, futures commission merchants, and foreign financial institutions.
People are bound to forgetfulness and not remembering where the keys are may prove disastrous as cryptocurrencies are impossible to recover once keys are lost. Securing volumes of crypto assets through custody offers users a similar experience with traditional banks. Crypto custody solutions are designed to secure, protect, and insure large digital asset volumes even if the owner ends up losing keys as it can be replaced by the custody management outfit. With this advantage and experience, retail investors and daily consumers will come to trust its similarities with banks that they are accustomed to. With its built-up, infrastructure, and environment, traditional wealth management entities like banks and financial institutions are beginning to avail of crypto custody services to complement their traditional processes to be able to cope up with the purchase, transfer, and custody of cryptocurrency assets, and be at par with the shifting financial landscape.
Many countries are exploring the world of cryptocurrencies such as CBDCs, tokenization of real assets, crypto-enabled banking, and custody services. Germany even passed a crypto law with the aim of making the nation not only the toast of Europe in the economy but also the new haven for cryptocurrency assets. crypto custody services are innovative and revolutionary in the sense that their aim is to guarantee the protection of crypto assets from known and unknown dangers the asset class industry is facing.
eQapital is relevant now more than ever in catering to the currently evolving needs of the digital investor. Financial services from Trust, Custody, Exchange, Transfer, to Asset Management needs are strategized on blockchain infrastructure to empower you to control your funds, whether fiat or crypto. Security is in place with AML/KYC/CFT procedures. Our friendly eQapital Team is always ready to assist you 24/7. Contact us now and let us be partners towards your progressive financial health goals.