Digital assets like cryptocurrency, stablecoins, and security tokens are rewriting the future of finance, with Standard Chartered predicting their total value to hit US$30 trillion by 2034. 

As the digital asset landscape evolves at a rapid pace, institutional investors are demanding more sophisticated solutions to safeguard and optimise their holdings. In the article below, we explore how digital asset custodians are responding to these challenges by harnessing AI and automation, building interoperable networks, adopting advanced security protocols, and offering multi-asset custody platforms. 

Read on to discover the latest innovations shaping the future of digital asset custody and how these developments can empower your organisation to navigate the complexities of this dynamic market with greater confidence and efficiency. 

1. AI and Automation 

Institutions are using AI to detect anomalies around transactions, suspicious irregularities, and address real-time risks. In 2022, Binance Custody partnered with US blockchain intelligence company TRM Labs to strengthen their risk management and build a more robust compliance framework. Examples of their work included: 

  • real-time transaction monitoring to inhibit money laundering. 

  • proactive wallet screening to identify sanctioned cryptocurrency addresses.  

2. Networks and Interoperability

Digital asset custodians are becoming ‘one-stop shops’, enabling clients to trade, stake and interact with the wider digital asset economy. Custodians are helping to shape compliant and secure gardens, enabling increasing access to DeFi protocols, allowing clients to leverage their assets for additional yield. These protocols also allow clients to remain compliant with built-in solutions that help ensure that all risks are assessed and quantified. 

Custodians are building secure (often permissioned) networks, enabling them to improve client service offerings by collaborating with other digital service providers and infrastructures. Developing new operating models, they improve efficiencies and mitigate risks. A recent example includes the advent of the off-exchange settlement model which helps to reduce settlement risk by enabling transactions between parties. This model securely holds clients’ collateral securely in protected custody accounts; thus eliminating the need for clients to prefund accounts, and ensuring a simultaneous fulfilment of obligations. 

3. Advanced Security Protocols and Automation

The security of digital assets is paramount for institutional investors. Custodians are now leveraging advanced cryptographic technologies such as Multi-Party Computation (MPC) and post-quantum cryptography. For example, Cobo’s MPC custody solution distributes private key fragments across multiple secure environments, ensuring the full key is never reconstructed in one place and enabling real-time, automated risk monitoring to detect and respond to threats instantly. MPC allows for the distribution of private key fragments across multiple locations, greatly reducing the risk of a single point of failure. This is a significant step up from traditional cold storage or single-key solutions, offering enhanced protection against cyber threats and internal fraud.

4. Multi-Asset Custody Platforms

Digital asset custodians are expanding their service offerings well beyond simple safekeeping.  Major custody providers like Fidelity Digital Assets and Goldman Sachs have recently expanded their platforms to support a wide range of assets, from cryptocurrencies and tokenised securities to non-fungible tokens (NFTs) and central bank digital currencies (CBDCs). This multi-asset approach enables institutional clients to consolidate their holdings, manage risk, and optimise liquidity from a single, integrated dashboard. 

In summary, digital asset custodians are setting new standards in security and operational flexibility. By adopting advanced security protocols and building interoperable, multi-asset platforms, they are empowering institutional clients to navigate the fast-evolving digital finance landscape with confidence. 

A Trusted Solution 

For those seeking a reliable partner in sourcing and monitoring of a digital asset custodian, Thomas Murray’s DACM solution unlocks a strategic advantage.  

With our expert consulting services and proprietary technology, you’ll enjoy bespoke due diligence, actionable insights, and continuous optimisation of your digital assets. Backed by decades of global risk expertise, our Orbit Risk platform gives you real-time, end-to-end oversight of your digital custodians. 

Interested in strengthening your approach to digital asset custody? Get in touch using the form below to request a demo and learn out how Thomas Murray can support your risk evaluation, monitoring, and strategy execution in the digital asset space.  

FAQs

  • What is a digital asset custodian?

    A digital asset custodian securely stores and manages private keys and services blockchain-based assets. Similarly to traditional assets, digital assets rely on cryptographic keys which are unique secret codes that lock and unlock data, authorise the access and transfers of assets and are instrumental to ownership verification. The Digital Asset Custodians job is to protect these keys, integrate with blockchain networks, and maintain robust cybersecurity practices while navigating a complex and rapidly changing technological and regulatory landscape. These unique challenges demand specialised infrastructure and expertise beyond traditional custody models and knowledge.

  • How do custodians protect against cyber threats?

    Digital asset custodians protect against cyber threats using a multi-layered security approach. They deploy advanced cybersecurity technologies like encryption, multifactor authentication, and continuous monitoring to detect and block suspicious activities in real time.

    Strict access controls ensure only authorised personnel can handle sensitive assets, while regular security audits and penetration tests identify and address vulnerabilities. Custodians also maintain robust incident response plans, enabling swift action if a breach occurs. Compliance with global standards (such as SOC 2, ISO 27001, and AML/KYC regulations) further reduces risk and builds institutional trust. Many custodians offer insurance coverage to protect clients against losses from hacking or theft. Ongoing employee training and careful oversight of third-party vendors round out their comprehensive defence strategy.

 

Derek Duggan

Derek Duggan

Managing Director | Banks

Derek Duggan is Thomas Murray’s Managing Director, Banks. He originally joined Thomas Murray in 1995 as Head of Information Services, and originated and produced all of our market information products, including sub-custodian risk assessments and CSD guides.

Derek now leads the large team that delivers our banking solutions. He’s responsible for our banking line of business, including all aspects of network management, client relationship management and sales. 

dduggan@thomasmurray.com
Hugo Jack

Hugo Jack

Network Manager | Global Network Management

Hugo has responsibility for the Americas Region. He joined the company in 2012 in the Advisory team, assisting Institutional buy-side clients to evaluate, select, and monitor their asset servicing providers.

Currently, Hugo supports the ongoing monitoring and risk analysis of agent bank networks in line with AFME standards, for Global Custodian clients – which requires annual in-market due diligence reviews, meeting with the banks and local Financial Market Infrastructures. He also has responsibility for the ongoing development of Thomas Murray’s digital asset products and services.

hjack@thomasmurray.com