According to a July 11 report co-authored by wealth technology company Aspen Digital and consulting firm PricewaterhouseCoopers (PwC) on the custody of digital assets. In November 2021, the digital asset market peaked at approximately $3 trillion. The custodial segment of the market, however, stayed at the lower level of $447.9 billion in 2022.
Reportedly, there will be 120 custody service providers by April 2023, divided into two main groups: third-party service providers and self-custody options. The Ethereum Merge, the emergence of non-fungible tokens (NFTs), and the metaverse, which attracted institutional investors, are some of the significant institutional developments mentioned in the paper.
According to the survey, security presents the biggest concern for the custody business. As a result of the failure of FTX in 2022 and the consequent lack of adequate 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.”
Insurance coverage is a further area of difficulty for custodians. Users of self-custody solutions are not reimbursed for any accidental loss of digital assets and no insurance policies are provided. Family offices are cited in the report’s sources as an essential group to consider when selecting a custodian for digital assets.
The research offers investors a five-step process for choosing a custody service provider, including market mapping, grading providers, performance reviews, and other preliminary tasks.
Canada’s financial regulator provided advice earlier this month to assist fund managers in adhering to legal requirements for investment funds holding crypto assets. Additionally, it has reaffirmed its confidence in the cryptocurrency futures market, which it claims “promotes greater price discovery.”