The digital asset industry will exceed $3 trillion at its peak in November 2021. However, the custodial portion of the market remained more modest at $447.9 billion in 2022.
These figures are taken from a joint report on the custody of digital assets conducted by consulting firm PricewaterhouseCoopers (PwC) and wealth tech platform Aspen Digital. The 39-page document was released on July 11.
The report puts the number of custody service providers at 120 as of April 2023, divided into two broad categories: third-party service providers and self-custody solutions. Some of the major institutional developments mentioned in the report include growing interest in cryptocurrency staking due to the Ethereum merger, the emergence of non-fungible tokens (NFTs) and the Metaverse attracting institutional investors. be done.
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Security is a major challenge for the storage industry, according to the report. As his FTX failure in 2022 shows, it is due to a lack of proper governance, risk management and internal controls.
“Institutions are increasingly looking to protect their assets through self-custody solutions and trusted digital asset custodians, rather than simply holding them on exchange platforms.”
Another challenge for administrators is in the area of insurance contracts. Self-custody solutions do not provide insurance and users are not compensated in the event of accidental loss of their digital assets. According to sources in the Family Office report, a sound insurance policy is a key criterion when choosing a digital asset custodian.
The report suggests investors a selection approach for custody service providers, which includes five steps including market mapping, grading system creation, performance review and other preliminary steps.
Canadian financial authorities issued guidance earlier this month to help fund managers comply with legal requirements for investment funds holding crypto assets. It also affirms its confidence in the regulated cryptocurrency futures market, which it says will “facilitate greater price discovery.”
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