In a recent study by the PwC (a global big four accounting company) and Aspen Digital (a digital assets management firm), institutional investors reportedly call for more third-party digital assets custody providers than self-custody providers for their business activities in Asia. The study also highlighted the limitations of self-custodial programs.
According to the study, high-profile individuals, wealthy family offices, and institutional assets managers in Asia reportedly demand institutional-level crypto assets custody platforms to manage their crypto assets holdings, trading activities, explore new investment opportunities and other operational requirements.
Furthermore, the report revealed that there had been a massive increase in demands for third-party custody services from Asian institutional investors seeking help to navigate the rapidly-growing digital asset market, which is currently valued at $1.2 Trillion in market capitulation.
In addition, the report pointed out that self-custody solutions give customers absolute control and access to their crypto assets and unavoidably saddles them with the responsibility of managing and securing their private keys themselves.
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Given the nature of the self-custodial solutions, they are commonly plagued with hacks and thefts. These limitations gave third-party custody providers an edge over their counterparts as they are considered more secure and efficient in securing customers’ funds, stirring the massive demands by institutes, according to the study.
Digital Asset Custodians Are Expanding Their Roles
Furthermore, Aspen Digital stated in the report that more institutes are figuring out the shortcomings of self-custody solutions in managing their digital assets trading activities. Hence, they have started choosing third-party custodial solutions as they believe in their expertise to keep their funds safe.
Moreover, the study revealed that about 120 custody providers are currently operating in the Asian region. In 2022, PwC conducted research on metaverse which showed that about 82% of the United States executives envisioned that the Web3 functions would be incorporated into their operations in the next three years.
Notwithstanding, the recent study showed that institutional investors found some of the NFT-based self-custodial solutions challenging to use.
Consequently, the situation has led many crypto assets custodians to evolve from their primary role of securing crypto assets for investors to helping them navigate other crypto-related products like Non-fungible tokens, decentralized finance, web3, and metaverse, which are rapidly-growing, according to Aspen Digital.
In addition, Ducan Fitzgerald, the crypto and web3 co-lead at PwC, also commented on the study. He said that a very crucial quality often sought after in the traditional securities industry is the ability to safely keep crypto assets and make sure customers’ funds are separated from the providers’ funds.
Also, he said he is glad that many digital solution providers are now providing the same quality services to clients in the cryptocurrency industry.
Crypto Custodian Solutions Aim To Solve In Investment Issues
Furthermore, Elliot Andrews, the CEO of Aspen Digital, revealed that one of the significant barriers in investment for institutional investors who want to venture into crypto assets is the ability to decipher the uniqueness of custody solutions and providers in comparison with traditional assets.
The CEO continued that applying the proper crypto custody solution is vital to the success of investment ventures, and it also helps to mitigate asset losses.
Even though there is a massive demand for institutional-grade crypto custody solutions, Aspen Digital highlighted that investors are still worried about the insurance coverage, unclear regulations, and asset insecurity that plagued the crypto industry.
Nonetheless, the research pointed out that digital assets custody providers are well aware of the situation and constantly creating solutions to combat the problems by complying with evolving rules, using enhanced technologies, and confining the insurance coverage on different crypto to customers’ expectations.
The report of the study reportedly surfaced when the spot bitcoin ETF which was proposed by BlackRock and set to be custodied by Coinbase, is under review in the United States. If the proposal is approved by the American SEC, institutional investors would have another avenue to exploit BTC without necessarily holding the asset.