The Importance of Qualified Digital Assets Custody in the Growing Digital Asset Market
As interests in digital assets continue to grow, there is a greater need for the secure storage of these assets. This has led to the emergence of qualified digital asset custody which has become an important aspect of the digital asset market. A qualified digital asset custodian offers a service that utilizes specialized technology to store the private keys associated with digital assets to ensure the highest level of safeguards against theft or loss. In this blog, we will explore why qualified digital assets custody is a crucial part of the digital asset institutional players.
Significance of Qualified Digital Assets Custody
Digital assets can be stored in different types of digital wallets depending on an organizations’ preference for the level of security and accessibility. Active traders may opt for hot wallets, whereas a family office may resort to a cold wallet (Learn more about the different types of wallets here). However, as the digital asset market evolves, cybersecurity risks and increasing regulatory scrutiny make it challenging for organizations to safely secure their assets in which they may require aid in doing so. This is where qualified digital asset custodians come in, as they offer a variety of benefits including advanced security protocols, regulatory compliance, accessibility, and institutional-grade services to help mitigate the risks associated with digital asset storage.
Security
Digital assets are stored in digital wallets, making them inherently vulnerable to theft or loss if proper security measures are not in place. A licensed digital asset custodian can provide a higher level of security through the use of advanced security protocols and technology such as MPC-CMP technology, multi-factor authentication, and encryption to ensure the safekeeping of private keys and digital assets.
Other than the physical and cyber security of private key management, another significant aspect is the standards that the qualified digital asset custodian implements in its security and operations of their service. Security standards can be exhibited through SOC 1, SOC 2 audit reports or the implementation of ISO standards. These ensure that the qualified digital asset custodian has gone through audits and reviews of their security and operational measures in properly identifying and mitigating risks.
Compliance
Qualified digital asset custodians with license ensure that organizations’ assets are compliant with industry regulatory standards such as Know Your Customer (KYC), Anti-Money Laundering (AML) and Counter Terrorist Financing (CTF). This makes them better equipped to meet strict requirements for custody and provide an elevated assurance that digital assets are stored in compliance with regulatory standards. Therefore, a qualified digital asset custodian can help organizations avoid potential legal or compliance penalties. Moreover, it also supports organizations to stay within their regulatory requirements.
Accessibility
Another important benefit that a qualified digital asset custody should have is accessibility. It provides user-friendly interface and 24/7 customer support to help organizations manage their transactions and portfolio with ease and confidence. Moreover, as organizations that manages digital assets will eventually have accounting and reporting, the qualified digital assets custody of their choice should include features such as real-time updates which can save time and effort for organizations to monitor their assets easily while also guaranteeing that their assets are secured and protected.
Institutional-grade Services
Qualified digital asset custodian provides institutional-grade services that allow organizations to design and customize their policies according to their unique needs and requirements for security and compliance. This is enabled by using a policy engine to enforce these polices, while utilising tiered authentications to manage different levels of authentication for different types of transactions, adding an extra layer of security based on the organization's risk profile (Explore more about these risks here). In addition, some common features include segregated accounts, proof of reserve, customized reporting, and transaction monitoring. Segregated accounts ensure that a client's assets are kept separate from the custody provider's own assets. Whereas proof of reserve, customized reporting and transaction monitoring provide a high level of visibility and transparency that help identify and prevent illicit activities.
Conclusion
At Rakkar Digital, we recognize the importance of qualified digital asset custody to secure institutional assets. We provide a best-in-class digital asset custody solution, highlighting the significance of multi-layer security, high levels of transparency with proof of reserve, compliance regulations, and accessibility through enterprise-grade services.
Want to find out the benefits of Rakkar Digital custody service? Visit our product page to learn more.
