July 8, 2023

A Guide to Choosing the Right Digital Asset Custodian

Why do we need to choose the right digital assets custodian? Choosing the right digital assets custodian is crucial because it ensures the secure storage and protection of your digital assets. In the digital world, where the risk of hacks and theft is prevalent, entrusting your assets to a reliable custodian reduces the likelihood of unauthorized access or loss. This guide provides key factors to consider when selecting a digital assets custodian.
A Guide to Choosing the Right Digital Asset Custodian

Why do we need to choose the right digital assets custodian? Choosing the right digital assets custodian is crucial because it ensures the secure storage and protection of your digital assets. In the digital world, where the risk of hacks and theft is prevalent, entrusting your assets to a reliable custodian reduces the likelihood of unauthorized access or loss. This guide provides key factors to consider when selecting a digital assets custodian.  

Security  

Security should be your top priority when selecting a digital assets custodian. Look for custodians that offer the highest multi-layer security against cyber-attacks, theft, loss, and unauthorized use. These security measures may include Multi-Party Computation and threshold Cryptography (MPC-CMP) technology, multifactor authentication, and regular security audits. MPC-CMP technology ensures that private keys are decentralized and governed by multiple parties, eliminating the risk of a single point of failure. Additionally, custodians with multi-factor authentication secure user accounts from unauthorized access as it requires multiple forms of verification to access user accounts, adding an extra layer of protection. It is also important that custodians have regular security audits as they help identify and address any vulnerabilities in the custodian’s security infrastructure. For example, custodians that adhere to SOC2 Type 1 attestation compliance undergo a comprehensive evaluation of their security controls and procedures. By selecting a custodian that prioritizes such security measures, you can have confidence that your digital assets are well protected and secure.

Regulatory Compliance

Compliance with regulations is essential in the digital assets industry. It is significant to choose a digital assets custodian that adheres to relevant regulations such as Know Your Customer (KYC) requirements and Anti Money Laundering (AML) regulations. KYC procedures make sure that the custodian collects and verifies the identity of its customers, mitigating the risk of identity theft and fraudulent activities. AML regulations help prevent money laundering and the financing of illegal activities by implementing strict monitoring and reporting measures. For example, a custodian that holds a Trust or Company Service Provider (TCSP) License in Hong Kong demonstrates their commitment to meeting the regulatory requirements set by the Hong Kong government, operating within the framework of AML regulations. This ensure that the custodian operates in a compliant manner, providing an added layer of assurance and trust.

Asset Segregation  

Another important factor to consider when choosing a digital assets custodian is asset segregation. It is the practice of keeping customer assets separate from the custodian’s own assets and other customers’ funds. By selecting a custodian that prioritizes asset segregation, will help you minimize the risk of commingling, misappropriation, or unauthorized use of your assets by the custodian, added an additional layer of security and protection. Moreover, it provides greater transparency as it is easier to monitor performance, track transactions, and generate accurate reports for tax or auditing purposes. Custodians that prioritize asset segregation often provide regular statements or account summaries that clearly outline the accountability. This proves that you can have confidence in the custodian, knowing that your digital assets are being managed in a secure and responsible manner.

Support

When evaluating digital assets custodians, it is essential to consider the level of customer support they offer. There are three key aspects you need to look for which are Asset Support, Service Coverage, and Customer Support. Asset Support ensure that the custodian’s customer support team possesses expertise in addressing specific asset-related issues or inquiries. Service Coverage refers to comprehensive support availability, including 24/7 assistance to address concerns promptly. Customer Support encompasses the overall quality and accessibility of the custodian’s support to make sure that you receive timely and reliable assistance. With these three aspects, it can be guarantee that you will have a positive and smooth experience with the chosen digital assets custodian.  

Conclusion  

Choosing the right digital assets custodian is essential to protect your valuable digital assets. Not only they help provide a secure storage for your digital assets, but they also mitigate the risks of cyber-attacks, theft, and unauthorized access. By considering these factors, you can make an informed decision and entrust your digital assets to a custodian that offers the highest level of security, regulatory compliance, asset segregation, and customer support. These factors enable you to determine a reputable custodian that excels in these areas, providing you with peace of mind knowing that your digital assets are in safe hands.  

About Rakkar

Rakkar stands as Asia's leading qualified digital asset custodian, offering unparalleled asset security to financial institutions. Fortified by our strategic backing from SCB 10X, the investment arm of the Siam Commercial Bank, Rakkar Digital helms the industry’s leading bank-calibre security measures and compliance frameworks. Founded in 2022 and belting esteemed security excellence certifications such as ISO 27001 and SOC 2 Type 1 and Type 2, Rakkar Digital remains unwavering in its mission to offer the most secure, institutional-grade custodian services across Asia.

Disclaimer: Digital assets involve risks; investors should complete independent due diligence and research to carefully make investments according to their own risk profile.
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Date
May 27, 2024
Category
Institutions
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