How to Choose the Right Crypto Custody Solutions
Over the past few years, retail and institutional investors have had access to an increasing number of quality providers in the crypto custody space. Hardware wallets have traditionally been recommended as secure options for people looking to store their digital assets.
However, with the risks around individuals losing access to hardware wallet funds due to corruption or human error, many crypto custody providers have innovated, creating services to securely store digital funds with easy-to-use interfaces.
The value of crypto assets is growing annually and investors are expecting to store and take custody of their digital assets in a secure manner.
This article will show you what to look out for when searching for a crypto custody provider so you can find one that suits you and your needs.
What is a crypto custody provider?
Rather than storing crypto in cold storage on a hardware wallet, many are turning to trusted crypto custody providers to store their digital assets. Crypto custody providers specialize in securely holding digital assets such as Bitcoin (BTC), Ethereum (ETH), Polkadot (DOT), and stable coins (USDC and USDT).
With the rise in cryptocurrency exchanges, including Binance, FTX, Gemini, Kraken, Swyftx and CoinSpot, all crypto on these exchanges is held with a corresponding custody provider. There has also been recent legislation passed within certain US states allowing traditional financial service providers and banks to offer digital asset custody.
Companies such as MicroStrategy, Square and Tesla now hold tens of billions of dollars in Bitcoin and other cryptocurrencies on their balance sheets. Crypto custody providers like Coinbase custody and BitGo have been chosen to provide custody for and hold digital assets on behalf of these firms.
In addition to hot and cold storage options, hardware wallets, and using exchanges to store your digital assets, hybrid storage methods are also increasing in popularity. These are usually offered as software platforms (SaaS cloud software), that maintain key security by dividing them amongst different parties, using Multiparty-Computation (MPC), an advanced cryptography practice.
Why is crypto custody important?
Crypto custody is fundamental to the safety of all digital assets. If a private key is lost or stolen, all funds can be lost and unrecoverable. Thus, having strong key management is crucial. However, this can be complex and confusing for many investors that want to hold digital assets, without the headaches associated with managing their own keys via cold and hot wallets.
Crypto custody offers a safe alternative, from partial key control to full custody, with various degrees of access and the ability to delegate control to one or more users. Using a custody solution can greatly reduce the stress that can result from holding and managing your own keys.
What does Unido offer?
Unido EP has a proprietary, patent-pending multiparty computation (MPC), algorithm that can break up cryptocurrency keys into portions, allowing distributed control amongst members within an organization. The MPC system is called Unido Core and lets you not only use MPC to keep your keys safe, but allows your keys to be distributed across multiple parties as a form of secure corporate governance.
Unido’s offering is as user-friendly as other SaaS software, while also providing a wallet that keeps your digital assets secure because if a wallet has a number of key-signers (recommended for security), a majority must sign off on crypto transactions. Unido EP features advanced tools that enable businesses access to deep liquidity, Defi aggregation tools, and analytics so you can keep an eye on your holdings 24/7.
Why choose self-custody
Self-custody with Multi-sig functionality is a viable alternative to leaving your assets on an exchange or placing them in the hands of a third-party storage facility. Recently, we’ve seen crypto lender Celsius take digital assets off people and limit their ability to withdraw funds. This is a scenario no business or individual wants to deal with.
With self-custody, you control the key and therefore the assets. So long as you have measures in place to govern your signatories to avoid counterparty risks, self-custody through a multi-sig SaaS platform like Unido gives you more control over your digital assets.
Top 4 things to look for in a crypto custody provider
If you are required to find a qualified custodian, many providers are regulated by their local jurisdictions and must follow local laws to become qualified custodians. In the United States, the Office of the Comptroller of the Currency (OCC) oversees the authorization of financial institutions and banks to provide crypto custody services in July 2020. While this may be the case in the US, it’s worth checking local laws elsewhere to ensure providers comply with regulations in their jurisdictions.
Check to ensure the crypto custodian services you’re interested in have insurance over digital assets they hold. While some custody providers provide guarantees in the event of missing/lost keys, theft and damage to devices, others may not provide this safety net if funds are totally lost.
While the crypto space is relatively new, there are providers with many years of experience, some who have been operating for nearly a decade. If you’re new to crypto, you may need to do some research to find a reputable crypto custody service that suits your needs. A good starting point is checking if a provider has been audited. These can come from an independent auditor, either from within the crypto space or the traditional finance arena.
Also be sure to check if the provider has a dedicated customer support team available for your questions and concerns.
Crypto custody service costs wholly depend on the institution you choose. If you’re using a large provider with a third-party custody service, your costs will likely be higher. However, using crypto-native custody providers like Unido, can save you money while ensuring your assets are safe and accessible in real-time.
Importance of due diligence when choosing a crypto custody provider
Over the past few years, a significant number of enterprise and institutional organizations have allocated funds into DeFi markets, taking advantage of all this new asset class has to offer.
Ensure when allocating funds to a crypto custody provider you have done due diligence, know how to use the platform and tools available to you as a client, and have confidence in the provider you trust with your digital assets.
About Unido EP
Unido EP takes the complexity and expense out of digital asset management for organizations with sophisticated corporate governance needs. Our patented, end-to-end platform seamlessly automates corporate governance and self-custody of crypto assets so you can securely store, manage and invest in crypto without massive overheads.
Unido EP comes with a web-based dashboard and a decentralized application (dApp) featuring a robust set of Defi tools, easy-to-set-up authority regimes and iron-clad security. All of this is inside a complete digital asset management platform, built with financial institutions in mind but tailor-made for any organization or individual’s needs.
The information presented in this content is general in nature and has been prepared without taking into account your individual objectives, needs or financial situation. You should consider whether the information is appropriate for you before making an investment decision.