Institutional Digital Asset Custody Technology

Digital asset custody is a term used to describe the secure safekeeping of digital assets on behalf of individuals, institutions, or businesses. This includes the storage and management of cryptocurrency, stablecoins, securities, or other tokenized assets.

Because digital assets exist only on the blockchain and ownership is determined by who controls the private keys (the cryptographic credentials that allow spending or transferring assets), custody services are designed to protect those keys and prevent loss, theft, or unauthorized access.

Ripple Custody is a self-custody technology that enables secure transfer, settlement, and tokenization of digital assets. This includes cryptocurrencies, stablecoins, and real-world assets (RWAs) like real estate and bonds. It uses both multi-party computation (MPC) and hardware security module (HSM) security measures for private key management.

Ripple Custody is built to withstand the highest institutional demands and is FIPS 140‑2 Level 4 certified, ISO 27001 certified, and SOC 2 Type II compliant. In addition, it enforces strong governance with configurable access controls, policy enforcement, and multi-party approval workflows that can reduce risks like fraud or unauthorized access.

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Self custody in crypto is where an individual (or individual institution) takes full responsibility for holding and securing crypto assets they own instead of using a bank, exchange, or third-party digital asset custodian to secure the assets, the account owner holds and controls the private keys, and nobody else has access.

A non-custodial crypto wallet is the tool that enables self custody. Individuals utilizing the self-custody method use a non-custodial crypto wallet to store, send, and receive crypto while maintaining full control over their private keys.

Self custody and Ripple Custody serve different needs, and Ripple’s infrastructure can support both models. In the self-custody model, individuals or their financial institution control the private keys that allow movement of digital assets. Ripple Custody is an institutional-grade custody platform that’s designed for banks, asset managers, and fintech companies to safeguard client assets. It’s configurable so institutions can set it up to function as a self-custody framework for customers to use.

Institutions implementing Ripple Custody for self-custody use cases retain full control over private keys by installing the platform in their secure IT environment instead of outsourcing custody to Ripple in the cloud. By following the on-premise deployment model for Ripple Custody, private keys never leave the organization. Since Ripple Custody supports multi-party computation (MPC) and hardware security modules (HSMs), private keys can be split among multiple parties or devices so no single person has unilateral control over the keys.

A crypto custodian, or digital asset custodian, is a trusted third party that securely holds and manages digital assets on behalf of individuals, institutions, or businesses. Because owning crypto assets requires managing the private keys that enable access to the assets, crypto custodians use advanced security measures so clients don’t have to manage the private keys directly. Those advanced security measures include multi-party computation (MPC), and hardware security modules (HSMs).

A hot wallet is a crypto wallet that’s connected to the internet, while a cold wallet is a crypto wallet that’s kept completely offline.

Hot wallet use cases include frequent transactions, such as trading and payments made using mobile apps, exchange wallets, and browser extensions. Hot wallets are fast and easy to use, but they are more vulnerable to hacks, phishing, and malware attacks since they are online.

Cold wallets are used for long-term, secure storage of digital assets. Examples of cold wallets are hardware wallets, paper wallets, or air-gapped devices. Cold wallets offer maximum protection against security threats, but they are more difficult to access and use than hot wallets.

A multisig or multisignature wallet is a type of crypto wallet that requires approval from multiple private keys to complete a transaction with a digital asset custodian. Instead of one person managing the private keys to move the assets, a multisig wallet uses an M-of-N structure. This is where, out of a total number of keys (N), a minimum number of keys (M) must approve transactions before they can move forward.

Multisig wallets have added security benefits because one stolen key isn’t enough to authorize illicit transactions and trust is distributed among multiple private key holders.

While both are used in digital asset custody, including Ripple Custody, hardware security module (HSM) and multi-party computation (MPC) are two very different approaches to securing private keys. 

An HSM is a physical tamper-proof device that generates, uses, and stores private keys securely inside. Private keys are created inside the HSM and never leave it, and all signing happens within the hardware. HSMs have been used by financial institutions since the early 1970s, and they require certification under strict security standards. However, HSMs do not fit all use cases since they require access to a centralized physical location, which can bring limitations when scaling across geographies or institutional locations.

An MPC is a cryptographic method or mathematical technique that is used to keep information secure. MPC in crypto is where a private key is split into multiple pieces that are held by different parties or systems. In this method, no single machine ever sees the private keys. Instead, the keys are split into shards, and then the shards collaborate to sign a transaction rather than reconstructing the whole piece in one place. The MPC method is advantageous because it’s flexible geographically but still maintains strict security standards. However, some institutions have found limitations in MPC due to its relatively new technology, and it can be more complex to implement and audit than other methods.

HSM security refers to the security protections provided by hardware security modules (HSMs). An HSM is a dedicated, tamper-resistant hardware device that generates, stores, and manages cryptographic keys in a secure environment. It’s one of the most established methods institutions use to secure digital assets and sensitive data.

The driving force behind HSM security is that private keys never leave the physical HSM device. These hardware devices are designed to detect and resist unauthorized access or tampering. Many HSMs are certified under strict government standards for cryptographic devices, and they require role-based access, PINs, or multi-factor authentication for use.