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Author: Admin | 2025-04-28
What Is a Crypto Custody Solution? Cryptocurrency custody solutions are third-party security service providers for crypto-assets. Their services are mainly aimed at institutional investors, such as hedge funds, exchanges, or exchange traded funds, who hold large amounts of bitcoin or other cryptocurrencies. The solutions generally incorporate a combination of hot and cold storage, which are crypto custody methods that are connected to or disconnected from the Internet, respectively.Key TakeawaysCrypto custody solutions are businesses that provide crypto storage services for investors or institutions with extensive cryptocurrency holdings.Coinbase, Gemini, and Bitgo are generally the biggest crypto custodial providers.The crypto custody solution industry is likely to continue growing as the crypto industry expands. Why Does Crypto Need Custody Solutions? The main utility of cryptocurrency custody solutions lies in safeguarding cryptocurrency assets. Private keys, which are alphanumeric strings used to conduct transactions or access crypto holdings, are the target of crypto-asset thieves because they provide access to the assets. People have developed many ways to store private keys offline—on paper, hard disk, or in commercially available electronic wallets manufactured for security. However, these devices can be lost or stolen, and in some cases, they can be hacked, so recovery may not be an option. For individual and institutional cryptocurrency holders, the possibility of losing private keys is a risk; however, institutions like large cryptocurrency exchanges are liable to their customers for the assets they hold, so they go to extreme lengths to guard against losses. The other important reason for the existence of cryptocurrency custody solutions is regulation. According to the Investment Advisers Act of 1940 (amended), institutional investors with customer assets are required to store their holdings with a "qualified custodian." The definition of qualified custodians includes "...federal or state-chartered bank or savings association, certain trust companies, a registered broker-dealer, a registered futures commission merchant, or certain foreign financial institutions."Crypto custody involves transferring cryptocurrency keys to the custodian, who secures them using enterprise data storage techniques. Most providers will likely use a combination of cold and hot storage to secure cryptocurrency but also provide a way to access it. Big Players in Cryptocurrency Custody Within the cryptocurrency ecosystem, very few mainstream banks offer custodian services. The task of holding cryptocurrencies and crypto-assets has fallen to businesses already involved. Coinbase Custody is the custodial services provider for the popular exchange Coinbase; Gemini Custody is the custodial solution provider for Gemini Exchange. Both are licensed by the New York State Department of Financial Services (NYDFS) as qualified custodians. The BitGo Trust Company is another popular and large qualified custodian. It received its license from the NYDFS in 2021. The Future of Cryptocurrency Custody Cryptocurrency custody solutions have become popular as analysts and institutional investors have
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