Crypto Custody: Market Drivers, Technology and Trend Analysis

Finadium
July 2018

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Crypto custody is the business of maintaining security for digital assets like bitcoin, ether and other currencies and tokens. This is not traditional custody, but rather an emerging industry that requires sophistication across regulation, client requirements and security that can effectively deter cybercrime.

Crypto custody firms are growing to meet the actual and expected needs of institutional investors, including hedge funds, that want to participate in the digital currency market. For their part, serious investors will not participate without reliable safekeeping that meets regulatory requirements and also conforms to regular business practices. Crypto custodians hold an estimated $50 billion in assets, a small fraction of the $155 trillion in assets under custody at major banks. Even so, providers are optimistic that they are at the leading edge of a new service with strong market demand.

Regulation is driving many new dynamics in the crypto custody market, with providers pointing to their state or national regulatory registrations and approvals. Custody is fundamentally a business of trust, and crypto custody providers are working to show that they are reliable, hacker-free, and closely supervised.

This report has been written for securities industry market participants to understand the dynamics of the parallel crypto custody industry, and for crypto custody providers and users to gain insight into how this market is evolving.

Table of Contents

  • Executive Summary
  • Sources of Demand for Crypto Custody
  • Mechanics of Digital Custody Accounts
    • – Hot Wallets and Multisignatures
    • – Cold Wallets and Hardware Storage
  • Features of Service Providers
  • Regulation and Future Growth
  • About the Author
  • About Finadium LLC
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