Crypto custody is a term used to describe the process of securing assets from theft. Custodians – third parties that can be hired to look after your crypto for you – act as safeguards of your money, be it cash, securities, gold bars or virtual assets. Custodians have been around since the 1960s and are one of the pillars of the traditional banking system.
When it comes to crypto custody, it works a little bit differently. Digital asset custodians do not technically store any of the assets because all data and transactions exist on a public ledger called the blockchain. Instead, what they guard are users’ private keys – the important part of a crypto wallet that grants access to the funds held in it.
Crypto custodians are essential for the widespread adoption of digital assets. To this day, many institutional investors stay away from buying digital assets because of the lack of security. Institutions that manage large amounts of money such as hedge funds, pension funds, investment banks and family offices, are required by regulation to have a custody partner to keep their clients' money safe.