Features to Look for in a Digital Asset Custody Provider

As tokenized assets like crypto and NFTs become major financial players, participants need robust security solutions. This is where digital asset custodians come in!

They have revolutionized the way individuals, financial institutions, hedge funds, and cryptocurrency exchanges store and manage digital assets. 

But here’s the thing: Not all digital asset custodians are the same. Choosing the right one can be challenging, especially when your digital assets are at stake. Here are six features you should look for in a digital asset custodian. 

1. Advanced Security

This is pretty obvious. A reliable digital asset custodian provides complete protection against fraud, security threats, and operational failures. Essential security features include:

• Offline storage, mainly in the form of cold wallets.
• Hardware Security Modules (HSMs) to keep cryptographic keys secure.
• Multi-Party Computational (MPC) Wallets to protect keys against single points of failure.
• Multi-site storage
• Multi-signature approval
• Separation of custodial and operational funds
• Multi-factor authentication
• Biometric identification protocols

2. Multi-Asset Support and Scalability 

Institutional portfolios are not limited to Bitcoin and Ethereum anymore. This is why a digital asset custody provider must provide multi-asset support. We are talking about all kinds of tokenized securities and chain assets. 

Moreover, reliable custodians like BitGo can scale with your needs. As you invest in numerous assets and trade them, your custodian should be able to provide robust support. As a result, you won’t have to switch providers to trade a different asset.

Your digital asset custodian should also integrate with third-party trading platforms for a smooth experience. This can prove to be cost-effective in the long run. 

3. Regulatory Compliance

Financial institutions and hedge funds need to comply with industry regulations all the time. Choose a custody provider that offers:

• Robust screening tools to make sure high-value transactions are always executed after screening.
• Compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. 
• Customizable risk controls. This is especially beneficial for large-scale crypto exchanges that have numerous clients with varying needs.

4. Ease of Use

You know what’s worse than a digital asset custodian that doesn’t comply with security regulations? A complex one. Choose a custodian that offers an easy-to-navigate platform. Look for:

• An intuitive dashboard
• Role-based access control
• Real-time updates
• Mobile compatibility 
• Simplified workflows
• Robust customer support

5. Insurance and Fraud Protection

Insurance and fraud protection features are a must for institutional investors and hedge funds. No matter how many security measures your custodian takes, there is still a risk of theft or misplacement. This is why digital asset offers insurance on your digital assets.

In most cases, digital custodians offer insurance for cold storage and protection against criminal acts. However, administrative errors, internal collusions, and lost keys can also be covered in some cases. 

6. Cost Efficiency

Lastly, compare the costs of numerous digital asset custody providers. Get quotes and analyze whether their compliance and security measures match the cost. 

Remember that a reliable digital custodian won’t necessarily break your bank. A little research can save you hundreds of dollars.