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Institutional Investors Look for 3rd Party Custody Solutions to Navigate Digital Asset Ecosystem



11 July 2023, Hong Kong – Digital asset wealth tech platform Aspen Digital and PwC announced and released a joint report titled “State of Digital Asset Custody - Understanding and implementing digital asset custody for institutional investors”. The report indicated a growing demand for institutional-grade digital asset custody solutions among family offices, high-net-worth individuals (HNWIs), and external asset managers (EAMs) in Asia to safeguard both their existing digital asset holdings and new investment targets.


Over the past decade, digital assets have grown into a US$1.2 trillion market and evolved to an alternative asset class, with over 120 custody providers as of April 2023. While self-custody solutions allow institutions to have full control and access over their digital assets, study finds more institutional investors are recognizing the limitations of self-custodial solutions for their ongoing trading and operational needs. Instead, many institutions prefer third-party custody service providers.


According to PwC's 2022 Metaverse Survey, 82 percent of executives expect to integrate metaverse into their business activities within three years. However, according to the latest study, most NFTs custody services offered by self-custody solutions may pose a challenge for institutions new to the industry.


Hence, digital asset custodians have expanded their role from the safekeeping of cryptocurrencies to helping investors navigate and participate in new business opportunities and types of asset classes, such as Decentralized Finance (DeFi), non-fungible tokens (NFTs), and metaverse. It is expected that there will be more third party custodians worldwide striving to enhance their technical capabilities and service offerings in the future.


Duncan Fitzgerald, Digital Assets & Web3 Co-Leader of PwC, commented on the importance of safekeeping assets in the digital environment.


"Safekeeping of assets and ensuring they are segregated from client service providers' own (house) assets is a fundamental need. This has applied for many years in the traditional securities industry – so I am pleased to see that there are credible options available now in the digital assets ecosystem."


Elliot Andrews, CEO of Aspen Digital, says that investors are more willing to invest in the safety of custody and there is a general need for greater knowledge of custody solutions.


“For institutional investors looking to allocate into digital assets, understanding the unique characteristics of custody solutions and providers compared with traditional assets is one of the biggest impediments when considering investment.”


“Implementing the right digital asset custody solution is crucial for successful investment opportunities and to avoid significant asset losses. Institutional investors should take a systematic and informed approach to selecting third-party providers for digital asset custody,”


Despite the need for institutional-grade digital asset custody continues to grow, there are some hesitations among family offices and HNWIs about adopting custodian solutions, particularly regarding ensuring asset security, navigating fragmented regulations across jurisdictions and providing comprehensive insurance coverage.


Digital asset custodians are addressing security risks through advanced technologies such as multi-party computation, keeping up with evolving regulations, and meeting investors’ expectations for insurance coverage across different types of digital assets.


The findings of the report are based on feedback from family offices, ​​HNWIs and EAMs based in Asia in the second quarter of 2023. In-depth follow-up interviews were also conducted to acquire additional perspectives on custodian adoption.


In continuation of the joint report Aspen Digital released with PwC, there will be a panel discussion on 14 August 2023 to dive deeper into digital assets custody solutions for institutional investors with industry experts. Please follow Aspen Digital's LinkedIn page for details.


Download the full report: http://bit.ly/43ljliW


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About Aspen Digital

Aspen Digital is a full-service digital asset wealth-tech platform for wealth managers, family offices and HNWI. Backed by both blockchain and traditional investors including the Everest Ventures Group, TTB Partners, RIT Capital Partners (formerly Rothschild Investment Trust), Liberty City Ventures and Token Bay Capital they provide the technology and expertise to enable clients to build their digital asset portfolios.

Since inception, Aspen Digital has offered institutional-grade cold storage services that are MPC-based through Fireblocks.


For more information, please visit https://www.aspendigital.co/


About PwC

At PwC, our purpose is to build trust in society and solve important problems. We are a network of firms in 152 countries with more than 328,000 people who are committed to delivering quality in assurance, advisory and tax services.


Digital assets are a global financial services priority for PwC. Our global digital asset working group was established in 2017, with PwC Hong Kong as the main driver and centre of excellence. The PwC Global Digital Asset Team is composed of over 150 professionals active in over 25 countries, offering a one-stop shop solution for our clients across our multiple lines of service. We have already completed over 300 crypto client engagements in the past two years. We help both digital asset natives to institutionalise and traditional financial institutions and investors to enter into the digital asset universe, including entity setup and public company readiness, systems implementation, cybersecurity, internal controls and governance design, audit and attestation, corporate and personal tax, deals strategy and due diligence, and SFC licensing support.


For the latest information about PwC Hong Kong, please visit: https://www.pwchk.com/en/about-us/about-us.html


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