State of digital asset custody - Understanding and implementing digital asset custody for institutional investors

July 2023

Since Bitcoin’s inception in 2008, digital assets have emerged as an alternative asset class and gained significant attention from institutional investors. As digital asset adoption has surged, the need for institutional-grade digital asset custody for family offices, high-net-worth individuals (HNWIs) and asset managers has also continued to grow. The PwC Aspen State of Digital Asset Custody report sheds light on the role of custody in enabling Asian institutional investors to grow and capture new opportunities in the digital asset ecosystem.

Institutions face key challenges in the safeguarding and transacting of digital assets, whether it be from operational complexity, security and reputational risks, or availability of insurance policies, among others. As the digital asset industry evolves, more institutions realise that self-custodial solutions have limitations in supporting the ongoing trading and operational needs of their growing digital asset portfolios. Many market participants have indicated that institutional investors are increasingly seeking reliable, institution-grade digital asset custody options to safeguard both their existing digital asset holdings and new investment targets.

Additionally, many digital asset custodians have been expanding their role from just the safekeeping of cryptocurrencies to also helping clients navigate and participate in new business opportunities and asset classes, such as decentralised finance (DeFi), non-fungible tokens (NFTs), and metaverses.

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.