In the rapidly evolving world of digital assets, securing your investments is a must. Crypto custody solutions play a crucial role in this regard, offering a safe and compliant way to manage and protect cryptocurrencies. This guide will delve into what crypto custody actually means, why it's essential, and how Januar's services can provide unparalleled security for your digital assets.

What is a custodian?

In the simplest terms, a custodian is a company (an entity or service) that holds and manages the private keys associated with digital assets on behalf of its clients. These custodians are responsible for safeguarding these assets from potential threats like theft, loss, or hacking.

For institutional investors—think hedge funds, asset managers, and corporate treasuries—centralised custodians offer peace of mind. By outsourcing the storage and security of their digital assets to a professional custodian, these investors can focus on their core business activities while relying on the custodian's expertise to mitigate risks.

Some well-known examples of centralised custodians include Coinbase Custody, BitGo, and Fidelity Digital Assets. These custodians often hold billions of dollars in cryptocurrencies. 

What is Crypto Custody?

Crypto custody refers to the methods used to securely store and manage digital assets like cryptocurrencies. The safe storage can be done via physical means (like storing the key in an old military bunker in the mountains) as well as via digital means (for example, using hardware wallets, multi-signature wallets, or institutional-grade custodial services that employ advanced encryption and security protocols).

Cold Storage

Cold storage involves keeping cryptocurrencies offline, away from internet connections. This method is highly secure because it is less vulnerable to hacking and online attacks. Cold storage solutions often include hardware wallets or secure, offline vaults.

Hot Storage

In contrast, hot storage keeps cryptocurrencies online, allowing for quicker transactions and easier access. While convenient, hot storage solutions are more susceptible to cyber threats and require robust security measures to mitigate risks.

Why Offer Crypto Custody Services?

The demand for crypto custody services is growing rapidly. Financial institutions, investment firms, but also individual investors are all seeking reliable solutions to safeguard their digital assets.

Institutional Demand

Institutional investors require secure and compliant custody solutions to manage their crypto holdings. This demand has led to a surge in specialised crypto custody providers offering tailored services. 

New Business Opportunities

The rise of stablecoins, NFTs (non-fungible tokens), and other emerging digital assets has revolutionised the financial landscape, offering unprecedented opportunities for new businesses. According to a report by Deloitte, the global market for digital assets is projected to reach $23.3 billion (!)  by 2026, driven by increasing institutional interest and consumer adoption. This growth is not merely a trend but a paradigm shift in how value is stored, transferred, and perceived.

Stablecoins alone have seen a remarkable increase, with their market cap surpassing $130 billion in 2023 and at the time of writing sitting at $172 billion in 2024, according to CoinMarketCap. This rise reflects a growing demand for assets that combine the stability of fiat currencies with the efficiency of blockchain technology. Businesses that can effectively integrate stablecoin custody solutions are positioned to tap into a market that is not only expanding rapidly but also maturing.

Moreover, the NFT market, which exploded with over $10 billion in sales in Q3 2021 (as per DappRadar), continues to evolve beyond art and collectibles. NFTs are now being explored in sectors such as real estate, gaming, and even intellectual property. This diversification offers businesses a chance to cater to a broader client base, from art enthusiasts to enterprises looking to tokenize physical assets - or real world assets (RWAs).

Looking ahead, the integration of stablecoins and NFTs into mainstream financial services could unlock new revenue streams and client engagement models. Reports from PwC suggest that Blockchain technologies could boost the global economy US$1.76 trillion by 2030 through raising levels of tracking, tracing and trust, highlighting the vast potential for early adopters in the crypto custody space.

By focusing on these promising areas, businesses can not only diversify their offerings but also position themselves at the forefront of a financial revolution. The future of markets lies in the seamless integration of these digital assets into everyday transactions, and the businesses that embrace this change will be the ones that thrive.

How Crypto Custody Providers Secure Your Assets

Crypto custody providers employ a range of processes and technologies to ensure the safety of your digital assets. These include:

1. Multi-Signature Wallets: Requiring multiple private keys to authorise transactions enhances security by distributing control.
2. MPC (Multi-Party Computation) Wallets: Splits a private key among multiple parties, ensuring no single party has full control. Transactions are authorised collaboratively without exposing key shares, enhancing security against breaches.
3. Encryption: Encrypting data ensures that only authorised parties can access sensitive information.
4. Regular Audits: Conducting regular audits helps to identify and address any vulnerabilities in the security framework.
5. Cold Storage: A common practice is to store the majority of assets offline, away from internet exposure, to reduce the risk of cyber-attacks.

Why choose Januar for your crypto custody needs

At Januar, keeping your digital assets safe is our top priority. That's why we've teamed up with Fireblocks, a leader in wallet and custody security, to offer you the best protection for your crypto.

Top-Notch Security:
With Fireblocks' advanced technology, your assets are secured by some of the highest standards in the industry. You can trust that your crypto is safe with us.

Regulatory Compliance:
We follow strict regulatory rules to ensure that your transactions are not only secure but also fully compliant with all legal requirements.

Easy to Use:
The Januar Wallet lets you store, manage, and trade your crypto easily. Our solution and partnerships ensure that while it's simple to use, it's also highly secure.

Expert Help:
Our team is here to support you every step of the way, making it easier for you to manage your crypto with confidence.

Choose Januar for a crypto custody solution that's secure, compliant, and easy to use, all backed by the trusted technology of Fireblocks.

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FAQ About Crypto Custody

Who is the largest crypto custodian?
Several large firms provide crypto custody services, including BitGo, Coinbase Custody, and Fidelity Digital Assets. If your business is headquartered in the European Union, consider our solution here at Januar.

What is the custody rule for crypto assets?
The custody rule for crypto assets, established by regulatory authorities such as the SEC, FINRA, ESMA, and FCA, requires investment advisers and financial institutions to use qualified custodians to securely hold clients' digital assets. These rules ensure asset segregation, regular audits, and robust security measures to protect investors' holdings.

How big is the crypto custody market?
As of April 2023, a report noted that there were around 120 custody service providers in the market. The global crypto custody market reached approximately $448 billion in 2022, driven by increasing interest in crypto staking and nonfungible tokens (NFTs). A report by PwC and Aspen Digital highlights key developments in the market, including the rise of self-custody solutions and the emergence of new institutional investors. Despite the market's growth, security remains a significant challenge, prompting institutions to seek reputable custodians and robust insurance policies​ (Coin Telegraph).

How much is the crypto custody fee?
Custody fees vary depending on the provider and the services offered. Generally, they are based on the amount of assets under custody and the level of security and compliance required.

For more information on crypto custody and to explore how Januar can meet your needs, visit our official Januar website.

If you would like to know more about investing in crypto, we have also provided guides as to how to open a crypto account as well as how to buy crypto. You can also find more information about how Januar complies with the MiCA regulations to ensure your safety and privacy

Disclaimer
The information provided in this article is intended solely for general informational purposes and should not be interpreted as professional advice from Januar. Please be aware that Januar is not a financial advisor. We strongly recommend that individuals seek independent guidance from qualified legal, financial, or accounting professionals before making any cryptocurrency investment decisions.