Today’s Top Crypto Asset Custody Issues for Users and Best Safety Storage Solutions?

The past couple of years have seen a sharp increase in the overall interest of the global investor community towards the crypto market. However, as the digital asset sector continues to evolve, there is one striking issue that seems to be confronting the industry at large— i.e. the availability of safe, long-term cryptocurrency storage options.

While for techies and other experienced crypto holders storage might not be a pressing matter, for novice investors this can prove to be a major challenge, especially since each year millions of crypto assets are lost due to owners implementing poor security protocols to protect their hard-earned assets.

This is where crypto custody firms come in. They are essentially institutional grade storage providers who aim to help in the safekeeping and management of one’s virtual currencies. Similar to custodians within the traditional economic domain, crypto custody firms help protect an individual's digital assets by making use of a plethora of different security algorithms and techniques.

More on the Matter

As the crypto market has flourished and grown over the years, the number of crypto custody firms too have increased in number. With that being said, we will now look at some of the key issues that are currently associated with such offerings:

(i) Inability to Prevent Recurring Incidents of Theft: Despite the fact that a number of exchanges have come up with highly sophisticated ways of storing digital currencies, hackers have continued to devise newer ways of stealing millions of dollars worth of digital assets every year.

(ii) Restrictions Associated With Crypto Usability: Another glaring problem related to crypto custody solutions is that they often impose certain functional restrictions on the assets that they have under their control. On the subject, Robert Hackett recently posted an article on Fortune where he illustrated scenarios where custody solutions “limit investors and traders from leveraging the fluctuating market forces to earn more or make buying and selling decisions.”

As a result of this, investors are kept away from participating in ‘crypto-economic networks’ — that are designed to help alt-asset holders stake their funds in order to provide support for a particular blockchain project.

Lastly, on this very issue, Satis Group published a report last year that clearly demonstrated that a refusal of partners (i.e. exchanges) to participate in crypto economic markets can sometimes be interpreted in a court of law as being “a breach of fiduciary duty”.

Final Take

At the time of writing this article, there currently exist a number of firms that provide their clients with a host of crypto custodial services. Some of them include:

Lastly, there are other big name players such as ICE, Fidelity Investments and Anchorage that too are going to be launching their very own regulated custodial services in the near future.

However, only time will tell how the future of this nascent market plays out from here on end.

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