All You Should Know About the Crypto Custodian Services
The crypto market has been growing at a tremendous pace. It has led to explosive growth in the trading volume across different crypto exchanges. Such growth has put an important question in front of the crypto businesses and institutional investors — How to keep their user funds secure?
Sensing the demand for security and storage services in the crypto market, a new breed of custodian services has cropped up. They help store and keep the user funds of crypto businesses secure. The crypto custodian service industry is in a nascent stage, but the competition is intensifying with the entry of new players.
So, what exactly does a crypto custodian service do, and who are the major crypto custodian services today? This article by Zild Finance will answer your questions.
What is Crypto Custodian Service?
Before we dive into what a crypto custodian service does, we must understand what it is first. They are third-party service providers who store and keep large quantities of cryptocurrencies secure.
Offering a secure storage system to crypto businesses and institutional investors in general to store large holdings of cryptocurrencies, crypto custodian services are an important part of the crypto-related service industry.
One of the most crucial segments of the crypto ecosystem today, experts believe that crypto custodian services are playing a key role in attracting institutional players in the crypto market.
How do Crypto Custodian Services work?
Employing both hot and cold wallet storage systems, crypto custodians aim to keep the crypto funds of their clients safe from hacking attacks.
A hot wallet refers to a wallet that is connected to the online world through the internet. This type of wallet makes it easier to access crypto funds, but at the same time, they are highly prone to cyber-attacks. On the other hand, a cold wallet refers to a wallet without any internet connection. This type of wallets is comparatively more secure as chances of cyber attacks for stealing funds are minimal.
Why is Crypto Custodian Services Needed?
Now the question is, what are the advantages of employing the services of a crypto custodian? Everyone in the crypto industry knows the importance of private keys. Anyone who forgets their private keys risks losing their crypto assets forever. If an institutional investor has signed us for the services of a crypto custodian, they would be able to help them out in such circumstances. Thus, they won’t lose their crypto assets forever because of forgetting their private key.
We can draw parallels with the services of banks here when one of their customers forgets their PIN code for a debit card. In this case, the bank will be able to help out the customer in accessing their bank account and resetting the PIN. Quite similarly, a crypto custodian would be able to help their clients in case they forget their private key. Thus, they won’t lose access to their crypto assets.
The Key Players in Crypto Custodian Service Space
Companies like BitGo, Anchorage, among a few others stand out as the top names in the crypto custodian space. Let’s know a bit more about them.
Founded in 2010 by Mike Belshe, a serial entrepreneur and a former Google engineer, BitGo is one of the premium custody service providers globally. BitGo came out with BitGo Trust Company in 2018. It was the first qualified custody solution specifically aimed at storing and securing crypto assets.
With BitGo’s entry into the crypto scene, the issues related to stability and lack of transparency in the crypto industry were put to rest. It was a major turning point as these issues were discouraging institutional investors from entering the crypto world.
Today, BitGo has come a long way since it started offering its services to crypto investors. Working in tandem with regulators, partners, and clients, BitGo provides custody for $100 million along with liquidity solutions to clients worldwide.
Founded in 2017, the San Francisco & Sioux Falls-based Anchorage was launched to meet the increasing demand for institutional custody services. As a state-chartered company with fiduciary powers, Anchorage assists SEC-registered investment advisors to meet federal obligations.
Anchorage aims to make it easy and safe to hold and use digital assets by bringing advanced and globally-proven security architecture to the crypto custody space. Visa has also made an investment of $40 million in Anchorage, sensing huge demand for their services from institutional players.
#3. Gemini Custody
Gemini is one of the most popular cryptocurrency exchanges in the world today. But along with its exchange services, Gemini also provides custody services to both individuals and institutional clients. They do not have any minimums and offer free setup. At the same time, they have flexible pricing for its crypto custodian services.
The custody service offered by Gemini is known as Gemini Custody™. It is protected by $200 million insurance coverage by Nakamoto, a Captive Insurance Company, licensed by the Bermuda Monetary Authority. Nakamoto is a part of Gemini Custody.
Clients of Gemini Exchange benefit from instant liquidation as Gemini Custody has direct integration with the Gemini Exchange. Licensed by the state of New York to custody digital assets, Gemini is a New York Banking Law qualified custodian and fiduciary.
One of the largest companies in the crypto space, Coinbase launched Coinbase Custody in 2018. Coinbase Trust Company, LLC is an independent, NYDFS-regulated entity, and it operates the crypto custodian service.
Clients can avail their services for access to a secure and institutional-grade offline wallet that Coinbase Exchange has been using since 2012. Providing support for all types of assets, clients must have a minimum balance of $1 million to avail the services of Coinbase Custody.
Along with custodian services, Coinbase also offers a staking service from safe, offline storage of assets, and this makes Coinbase the first company to do so. Coinbase also charges an implementation fee in the range of $1-$10,000 for its custodian services.
#5. Bitcoin Suisse
Bitcoin Suisse Vault Service of Bitcoin Suisse offers institutional-grade and fully audited crypto asset custody. It comes with a multi-signing process that is customizable to the needs of the client.
Founded in 2013, Bitcoin Suisse offers safe custody for TRON, ETH, BTC, BSV, LTC, BCH, XRP, EWT, and ERC20/223 tokens, the Bitcoin Suisse makes its vault available 24/7 for its clients. Their clients are private investors, institutional investors, corporations, and financial service providers.
The crypto industry has come a long way since Bitcoin came into existence. For many years, cryptocurrency investments were limited to retail investors, but many institutional investors have started investing in the crypto space now.
Due to rising interest in cryptocurrencies among institutional investors, the services of crypto custodian services are in huge demand. It has benefited some of the biggest names in the crypto industry who also provide exchange services like Coinbase and Gemini. Others like Bitcoin Suisse are also making it big in the crypto custodian service niche.
In the future, more companies will start offering crypto custodian services, and the competition will intensify further. But with further growth of the crypto market, the demand for crypto custodian services will also increase.
The crypto industry is growing at a rapid pace because of the growth in the number of interesting and authentic projects in crypto space. This, in turn, will benefit the crypto-related services as the demand for them rises. But the thing is that authentic crypto projects are hard to find.
Well, if you are interested in learning more about the interesting and emerging projects from the crypto world with real-world use cases, then check out Zild Finance today. We are changing the DeFi lending space for good.