Custody is key to institutional adoption of digital assets – PwC Hong Kong and Aspen Digital joint report

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Digital asset industry now worth US$1.2 trillion

Hong Kong, 11 July 2023 – Digital assets have grown in importance as an alternative asset class in recent years and have attracted significant attention from institutional investors. However, for adoption to continue to grow among High-Net-Worth Individuals (HNWIs), family offices and asset managers, institutional-grade custody solutions for digital assets need to be in place. This is among the main findings of the State of Digital Asset Custody report, jointly issued by PwC and Hong Kong-based platform Aspen Digital.

“The safe-keeping of assets and ensuring that they are properly segregated is a fundamental need,” says Duncan Fitzgerald, Digital Assets & Web3 Co-leader, PwC Hong Kong. “This has long been recognised in the traditional securities industry. It is pleasing to see that credible options are now emerging in the digital assets ecosystem.”

The digital asset industry has grown into a US$1.2 trillion market, featuring over 8,000 different cryptocurrencies. The launch of Bitcoin futures by the Chicago Mercantile Exchange in 2017 marked the start of digital asset derivatives as an asset class and led to ever greater institutional interest in digital assets.

The report casts a light on the key challenges faced by institutions in safeguarding and transacting in digital assets. Self-custody solutions have limitations in supporting the trading and operational needs of growing digital asset portfolios, while digital asset managers may not have the capabilities and resources to manage all operational complexity and security risks.

In the context of digital assets, custody refers to the process of safekeeping cryptographic private keys, which are used to execute transactions on a blockchain network. Custodians of digital assets are any individual or entity who controls a blockchain wallet’s private keys. However, these custodians have evolved to provide compliant and secure custody solutions specifically for institutional needs. They are also expanding their roles in order to help clients navigate and participate in new business opportunities and asset classes, such as decentralised finance (DeFi), non-fungible tokens (NFTs) and the Metaverse.

“For institutional investors looking to allocate into digital assets, understanding the unique characteristics of these custody solutions and how they differ from those for traditional assets is one of the biggest impediments,” says Elliot Andrews, Chief Executive Officer, Aspen Digital. “This report highlights how institutional investors can capture new opportunities in the digital asset ecosystem.”

The report argues that institutional investors need to take a systematic and formalised approach to selecting and implementing an appropriate custody solution. It then outlines a multi-faceted methodology that institutions can follow in order to implement their digital asset custody model. The full report can be accessed here.

Notes to editors

About Aspen
Aspen Digital is a full-service digital asset wealth-tech platform for wealth managers, family offices and HNWI. Backed by both blockchain and traditional investors including the Everest Ventures Group, TTB Partners, RIT Capital Partners (formerly Rothschild Investment Trust), Liberty City Ventures and Token Bay Capital they provide the technology and expertise to enable clients to build their digital asset portfolios.