Feb 7
Digital Assets Custody for Institutions
Introduction
Web3 brought programmability through smart contracts, composability with decentralized applications, tokenization with digital assets. There are many Web3 use cases implementing dApps for various real-life applications: stablecoins, lending and borrowing, exchanges, oracles, derivatives, insurance, governance & DAOs, real-world assets tokenization.
Any asset class will potentially be moved on chain in the next years, this implies that organizations providing products and services around digital assets need to figure out how to manage the private key, access to liquidity, and brokerage.
Digital asset's capabilities open the doors to new challenges to overcome. They can be traded 24/7, they bring into the financial systems new target segments, a great number of people, and an exponential magnitude of new transactions. The infrastructure that enables digital asset transactions must be efficient, reliable, secure, scalable, agile, and flexible to adapt to continuously changing technology and regulatory regimes.
New capabilities require a proper infrastructure that can support short-term experimentation and long-term vision providing operational efficiencies and risk management.
Business models and use cases around digital assets will be crafted by regulations based on jurisdictions, type of clientele, market demand, and technology evolution. It is a context in constant evolution and institutional and fintech are continuously experimenting with technical feasibility, product market fit, and business viability.
It is crucial to have a platform that abstracts the complexity of different protocols, token agnostic. Instead of adopting a one-off solution that serves a specific use case, the solution should be a modular platform that will custody assets based on changing needs, evolving requirements, and business models.
Digital assets custody solutions should provide an end-to-end gateway to manage keys with a single point of integration. In the short term, make it possible to do experimentation and choose the proper way to store keys in line with the use cases. Long-term, to scale, abstracting the complexity that comes from governance, privacy, security, compliance with regulations, different technologies, business models, and market demand.
Digital assets custodian solutions must enable operational efficiency and risk management, resulting in a shorter time to market, and a reduction of capex and opex through low-cost subscription-based services, with embedded compliance, and security.
Due to the heterogeneity of protocols, custodians' solutions must also provide, along with universal safekeeping, universal connectivity, interoperable between different tokens/standards, DeFi services (staking, borrowing ..security).
Eventually, custodians are the ones that will take care of clients also in the worst-case scenario.
