Digital Asset Custody Market Size
Digital asset custody services are becoming a more important part of the cryptocurrency ecosystem. These services provide protection, secure storage, and the ability to buy and sell digital assets. Custodians use cryptographic keys to ensure transaction security. Both private and public keys are stored at the custodian’s facility.
There are 113 providers of such services in the world, according to Blockdata. Although the size of this market is still in its early stages, there is a significant demand for these services. There is a growing number of institutional investors looking for safer ways to store and trade their digital assets. This growth is expected to continue as long as more financial institutions see the benefits of digital asset custody and continue to adopt the technology.
The market size of the digital asset custody industry is estimated at US$4.6 billion by 2021. Several major crypto-currency exchanges are launching independent, institutional-grade custody services. Coinbase, for example, has an institutional custody business that is regulated by the New York Department of Financial Services. Meanwhile, specialist independent institutional custodians have also entered the market, including HEX Trust, Komainu, Standard Custody & Trust, and Anchorage Digital.
For institutional investors, using custody solutions reduces operational costs. For example, custodians can protect private keys and allow institutional investors to focus on the core business of their businesses. Furthermore, if something goes wrong with their assets, they can quickly and securely recover them by turning to the custodians.
The Digital Asset Custody Market Size
Initially, there were few providers in the digital asset custody market, with the biggest players being specialized cryptocurrency exchanges. The first exchanges came online in 2010 to allow people to buy and sell Bitcoin. However, there were many issues with security and many exchanges lost assets. Fortunately, modern exchanges have improved their security measures and now offer custody services for a variety of cryptocurrencies. Most large exchanges are licensed by local governments all over the world.
The global digital asset custody market is expected to grow rapidly in the coming years. It will be vital for institutions to choose a partner with an industry-specific expertise to avoid problems. Capco has local operations in EU countries and local staff with expertise in local regulation. By selecting a partner country, organizations can ensure that their KYC data retention policies are compliant with GDPR.
Depending on the level of expertise and the amount of digital assets under custody, a custodian may be the best option for storing your crypto assets. Some custodians also offer staking and lending options, as well as insurance. The fees associated with digital asset custody can vary significantly between different providers.
Some crypto firms use a combination of cold and hot wallets to protect their funds. In most cases, the funds held in cold wallets are protected by multisignature schemes, while a small portion is held in hot wallets for liquidity. This approach helps the crypto firms to control costs by increasing automation. They also allow users to choose the type of custody they want.