Currency custody is the safekeeping and management of digital currencies by a trusted third party, usually a bank or financial institution. Custodians are responsible for storing and securing the cryptocurrency, verifying its authenticity, and managing transactions according to the owner's instructions. Large institutions or high-net-worth individuals primarily use this service with large amounts of wealth protection and need a reliable way to manage their currency holdings. In addition, currency custody helps ensure the integrity and stability of financial markets by providing a secure and efficient way to store and transfer currency.

Custody Types:

  1. Non-custody - When the assets are not under any third-party custodian. It is a type of Blockchain wallet that lets you be your bank. This implies complete control of users’ funds and the associated private key.
  2. Full custody - When the assets are under the custody of the custodian. Custodians are third parties that can be hired to look after your crypto and act as safeguards of your virtual assets. Digital asset custodians do not store any assets because all data and transactions exist on a public ledger called the blockchain. Instead, they keep the users’ private keys, the important part of a crypto wallet that grants access to its funds.
  3. Self custody - When the assets are locally held and stored in the owner's private wallet. This method is used when the owner wants complete control and ownership of their digital assets. Self-custody means keeping your crypto in a wallet where you control the private keys and seed phrases instead of relying on a third-party custodian like an exchange.