Cryptocurrencies and other digital assets worth billions of dollars require crypto custodians to keep them safe.
Cryptocurrency investors put a lot of money into crypto custody services, which safeguard digital assets like bitcoin. Fireblocks, based in Israel, raised $550 million in a new round of fundraising in January, valuing it at $8 billion.
Blockchain and Central Bank Digital Currency (CBDC) Working Group member Oriol Caudevilla said crypto custody companies allow institutional and private participants enter and use the crypto market while keeping their money safe. Due to high consumer demand, additional crypto custody companies will emerge. Customer demand is driving investment banks, hedge funds, and asset managers into the custody sector.
About Crypto Custody
Digital asset managers, for example, manage a customer’s private keys or provide unique technology solutions. Crypto custody comprises storing, processing, and securing funds against theft, hacking, and other forms of misappropriation.
Assets under custody (AUC) have surged 600% since the start of 2019. According to the same research, digital asset providers have raised $4,577 million as of January 2022.
A few of the firms that have bought crypto custody infrastructure startups are Coinbase, Paypal, Genesis, and Gemini.
According to Sharat Chandra, vice-president of research and strategy at EarthID, crypto custody is the link between web2.0 and web3.0 since it lets individuals to keep their money. To increase crypto’s popularity, it is critical that non-crypto natives can easily get started. The recent phishing attempt on the OpenSea NFT (non-fungible token) market, which resulted in the loss of over $2 million in NFTs, demonstrates the importance of proper digital asset security education.
Demand for Crypto Custody
As the cryptocurrency market grows, so does the value of crypto assets, which are becoming increasingly enticing to hackers and thieves.
According to the Blockdata research, recent instances such as the $196 million Bitmart exchange hack and the $97 million Liquid exchange hack highlight the industry’s worry for storage. Key management can be simplified by storing assets with a custodian. Investors can avoid many of the hazards associated with self-storage by hiring a professional custodian.
To solve the safety concerns surrounding cryptos, digital wallets and custodies are meant to meet those concerns. For people who own substantial quantities of Bitcoin or other digital tokens, crypto custody services are largely for institutional investors, including hedge funds.
Chainalysis revealed in December 2021 that nearly 20% of all Bitcoins appear to be lost wallets, valued $205.8 billion. Despite claims of security, hackers are targeting digital wallets. Decentralized storage alternatives are provided by custodians to investors to reduce risk.
According to the report, eight custody service providers presently hold around 10% of all cryptocurrencies, or $247 billion. Lesser-known suppliers include Ledger, Matrixport and Nydig.
Crypto Custody vs. Digital Wallet
A custody platform solution is when you open an account and then let the platform manage and protect your digital assets. The people who use digital wallets are in charge of protecting their own money and digital wallets.
Crypto Custody Supplier in India
India currently has no custodial wallets. According to Prashant Malik, general partner of Tykhe Block Ventures, India has no big custody solutions. You either have digital assets on an exchange or in a cold wallet like Metamask. These require utmost caution. Your hardware wallet like Ledger nano offers more security checks and limitations than a cold wallet, making it safer but less user-friendly.
Digital asset managers must combine usability and security. The online nature of digital assets makes them vulnerable to hackers, according to Patel.
Crypto custody providers may be in short supply, as most crypto exchanges provide default custody models on their own online wallets. According to FIS’s head of banking, Harish Prasad, most crypto exchanges provide their own online wallet as part of their primary business. Furthermore, the custodian is responsible for the security and protection of the crypto asset, and exchanges have been targeted by hackers in the past to steal cryptocurrency. He further stated that any firm providing crypto-custody services in India will likely be subject to anti-money laundering regulations.
India: Digital Assets should be Stored in Institutions
Vikas Ahuja, CEO of crypto exchange CrossTower India, argues institutional custody is safer. Custodians give an extra degree of security to wallets. Some even insure their wallets. Some wallets have cold and hot wallets.
Purushottam Anand, founder of Crypto Legal, a blockchain law firm, says regulating cryptocurrency custody firms is critical. Most crypto exchanges in India hold cryptocurrency custody and technically provide custody services to investors.
Digital assets are more vulnerable to cyber theft, fraud, and even incorrect blockchain transactions than physical assets. Anand also stated that there is no minimum standard of technology or security required by these exchanges, exposing investors to unlimited risk.
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