As digital assets continue to become further integrated in the global financial system, the need for secure digital asset custody solutions has never been more pressing. Most global finance leaders plan to deploy custody solutions within the next three years, and each will require robust, scalable security frameworks to protect against evolving threats. Ripple Custody provides a bank-grade solution designed for those seeking the highest levels of security, compliance and operational efficiency.
What is a Crypto Custody Solution?
A crypto custody solution ensures the safekeeping and management of digital assets; this foundational infrastructure can enable a variety of use cases like offering customers the ability to make payments with stablecoins, becoming a crypto custodian, or trading tokenized real-world financial assets like stocks and bonds. The stakes for how best to achieve secure crypto custody are high—digital asset adoption is surging, with 10% of the world’s assets expected to be tokenized by 2030, fueling a projected $16 trillion industry within the same timeframe.
To begin, a financial institution (FI) or business holding digital assets must choose one of two paths to protect their portfolio: a custodial or non-custodial wallet.
Custodial wallets place control of private keys in the hands of a third-party—typically a crypto exchange, fintech provider or bank. A FI or business may choose to outsource their custody needs for convenience, additional security layers, or to access other services offered by the provider such as crypto on- and off-ramps.
In contrast, non-custodial wallets give the asset holder full control of private keys but also place the responsibility of private key protection solely on the user.
Crypto custodians can range from traditional financial institutions to specialized fintech firms, provide security, regulatory compliance and streamlined asset management. Unlike traditional custodians that physically hold and protect assets, digital asset custodians secure the access to those assets (secret keys) using a combination of technologies like encryption, multi-signature authentication and user governance policies. Without these protections, institutions risk exposure to hacks, lost funds and regulatory non-compliance.
The Importance of Security in Crypto Custody Solutions
While crypto custody solutions can offer a wide range of digital asset management features and benefits, securing digital assets is their primary purpose. Threats to this security can arrive on many fronts. Phishing scams, social engineering attacks and compromised credentials are pervasive risks, with fraudulent websites, fake support teams and malicious software all able to deceive users into sharing private keys or authentication details.
The consequences of inadequate protection can be catastrophic. The recent Bybit exchange hack resulted in $1.46 billion in stolen digital assets, making it the largest hack in crypto history. A Chainalysis breakdown of the case revealed the hackers used social engineering to gain access to key computers.
These risks can be exacerbated by the popularity of new tokenized financial products like crypto ETFs that present additional considerations for custody providers. These investment vehicles require that both the underlying asset and the ETF itself be secured through a custody solution while still maintaining liquidity and market activity for investors. Inadequate key management can hinder trading efficiency or expose assets to vulnerabilities.
A well-designed custody strategy will balance accessibility with security to ensure seamless operations without compromising protection of a holder’s private keys. A multi-layered security and governance framework might include multi-signature authentication (to require multiple approvals for transactions); options for hot, warm, cold or air-gapped wallets; a choice for cloud-based or on-premise custody solutions; and either Hardware Security Models (HSMs) or Multiparty Computation (MPC) as private key protection standards.
Potential Risks of Crypto Custody
As part of designing a security framework and deploying a custody solution, digital asset holders must identify and address critical areas of vulnerability. Strong governance, technical integration and compliance with evolving global regulations are all non-negotiable elements of a secure crypto custody strategy.
No matter how strong a provider’s security practices are on the technical side, human error will always be a risk in both traditional and decentralized finance. Social engineering scams and phishing attacks can exploit lapses in employee training, making it imperative for institutions to enforce rigorous security education and access controls.
Compliance through regular audits and documentation is important for providers and institutions to take into consideration in order to understand how their location and technical choices impact compliance efforts. For example, some jurisdictions require the use of cold wallets while innovations like HSM for private key management can trigger a need for specific international compliance standards, such as GDPR, HIPAA and PCI-DSS.
Institutions must also decide whether to build their own custody solutions or enlist an established provider. While in-house solutions may offer customization and control, they require significant technical expertise, regulatory acumen and ongoing investment. Partnering with a custody provider can accelerate time to market, ensure adherence to best security practices and reduce operational overhead.
Finally, asset holders should confirm that their custody provider has built-in redundancies to mitigate single points of failure—centralized risk in a custody provider can be just as risky as inadequate security. End-to-end secure architectures and operating models that remove any single points of failure can provide further technical assurance, and help eliminate the potential for human error.
Key Features to Look for in an Institutional Crypto Custody Solution
Choosing the right custody provider requires evaluating a range of factors, from security infrastructure to regulatory compliance. A key distinction lies in how providers manage private keys—either through HSMs or MPCs—each addressing different use cases, security preferences, scalability and accessibility.
HSMs are physical hardware devices or cloud-based storage options that are effective but useless if lost or stolen. This makes them best used for wallets that are disconnected from the internet or for assets in long-term secure storage. MPC makes it harder to steal an asset by splitting private keys into multiple “shards” that can be distributed across secure storage options. Because this requires heavy computational resources, MPC is ideal for scenarios that demand fast, automated access to keys.
Technical expertise is another critical consideration. Cloud-based HSM solutions often require fewer internal resources to manage than MPC-based custody systems. Institutions should choose a solution that best aligns with their risk tolerance and operational framework.
To help with their choice, institutions should deeply consider the reputation, track record and regulatory history of any third-party custody provider. Digital asset custody is still a relatively new industry segment, making due diligence essential. Assessing past performance, security certifications and compliance with global standards helps institutions mitigate risk and ensure long-term asset protection.
Secure Digital Asset Custody with Ripple
Ripple Custody provides institutions with a fully integrated, battle-tested custody platform designed for 24/7/365 secure asset storage, transfer and settlement. Trusted by global banks, including BBVA, SG Forge, DBS Bank, and DZ Bank, Ripple Custody offers a comprehensive solution that prioritizes security, compliance and seamless connectivity with digital asset markets.
Ripple Custody’s certifications and security infrastructure set it apart as a leading custody provider. The platform integrates with top-tier HSMs, including IBM Cloud HSM, LinuxOne on-premise solutions, Thales Luna, AWS and more—all of which meet the highest market-rated FIPS certification standards (FIPS 140-2 Level 4). Additionally, Ripple Custody is SOC 2 Type II compliant, ISO 27001 certified and meets EAL 5+ security benchmarks.
A critical feature of Ripple Custody is the advanced governance framework, which enforces cryptographically protected process flows and transaction security. Multi-tenancy structures allow institutions to manage custody hierarchies efficiently while ensuring all transactions are verified at runtime through a secure governance engine. This means that no unauthorized modifications, malicious transactions or audit tampering can occur—providing institutions with full control over their assets.
Security and compliance are further enhanced with built-in integrations to Elliptic, a leading blockchain analytics provider that screens transactions for illicit activity and ensures adherence to Know Your Customer (KYC), Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) regulations.
With over a decade of expertise in both traditional finance and crypto, Ripple Custody stands as a highly secure, institution-grade custody solution. As the digital asset economy continues to grow, institutions must prioritize secure, scalable and regulatory-compliant custody solutions.
Learn more about how Ripple Custody can help safeguard your digital assets while enabling greater institutional adoption of blockchain technology.
