According to recent research, in 2022, the custody part of the digital asset industry reached a height of $447.9 billion in valuation, citing a rise of interest in crypto staking and NFTs as the major cause for the increase.
PricewaterhouseCoopers (PwC) and wealth technology platform Aspen Digital conducted a joint report on the condition of digital asset custody and cited these numbers. The document of 39 pages was released on July 11.
As of April 2023, the report categorizes 120 custody service providers into two broad categories: third-party and self-custody solutions.
The report identifies a rise in interest in crypto staking due to the Ethereum Merge, the emergence of nonfungible tokens (NFTs), and the metaverse, which have attracted institutional investors.
According to the report, security is the greatest obstacle for the custody industry. The failure of FTX in 2022 demonstrates a need for appropriate governance, risk management, and internal controls.
“Institutions are increasingly looking to safeguard their assets through self-custody solutions or reputable digital asset custodians, rather than simply holding them with exchange platforms.”
A further difficulty for custodians involves insurance coverage. Self-custody solutions do not offer insurance policies, and users are not compensated for negligently lost digital assets.
According to family office sources cited in the report, solid insurance policies are essential for selecting digital asset custodians.
The report proposes to investors a five-step strategy for selecting a custody service provider, including market mapping, creating a grading system, performance evaluation, and other preliminary procedures.
The Canadian financial authority issued guidance earlier this month to assist fund administrators in complying with legal requirements for investment funds holding crypto assets.
In addition, it has affirmed its confidence in the regulated futures market for cryptocurrencies, which it claims “promotes greater price discovery.”
