In 2008, Bitcoin was the first cryptocurrency to be developed. Slowly, through mining, select hobbyists were able to grow the number of coins there were. Then, more digital currencies developed, and suddenly there was a growing market of crypto investors. Traders and companies began accepting cryptocurrency as a form of payment for goods and services. Today, there is so much cryptocurrency in circulation that we have developed a need for wallets and other storage options to hold large quantities. When Bitcoin and other cryptocurrencies completely changed the way we invest, so did the way we store our assets. Unfortunately, not all banking systems support crypto just yet, so the cryptocurrency custodian was created. This article will look at what a cryptocurrency custodian is and why any cryptocurrency investor needs their services.
Cryptocurrency has progressed a lot since its inception in 2008, fully integrating into the portfolios of investors worldwide. Many tech investors see crypto as the currency of the future as it can be used to purchase goods and make investments. One of the biggest questions on a crypto investor’s mind is where cryptocurrency and digital assets will be held and managed? It’s not as simple as walking into your local bank and opening a digital currency holding account, especially if crypto is entirely inaccessible in some countries. Further, many investors now hold large quantities of tokens. Cryptocurrency custodians answer these questions. Cryptocurrency custodians are storage and security systems that are utilized to manage large sums of cryptocurrency. Institutional investors like hedge funds heavily use custodians.
Custodian services are typically divided into both hot storage and cold storage. Hot storage is crypto custody with a connection to the internet, while cold storage means it’s not connected to the internet. Hot storage offers liquidity but can be prone to hacking. Cold storage can be more secure, but it can be hard to liquidate quickly. There’s also a solution called a vault that is an online wallet but can only but are heavily encrypted. Each solution offers its own benefits, and a custodian can work with clients to determine the best solutions for them.
Let’s take a look at why investors need the services of cryptocurrency custodians. First, custodians offer a place to hold digital assets. Not a lot of mainstream banks offer cryptocurrency management just yet. Even though a few do, many investors appreciate institutions that are completely dedicated to cryptocurrency management rather than a bank that offers a wide range of traditional banking solutions. The shift we are seeing is that of a digital age. Tech-savvy individuals seek easy access, convenience, efficiency, and speed in every part of their lives, and with digital currency comes digital solutions. Having the ability to make transactions from the convenience of a phone or other electronic platform creates this need for custodians.
To conduct transitions or access crypto holdings, a private key is used. These keys can be lengthy and hard to remember. They are also vulnerable to being stolen. There are secure digital solutions where investors can easily keep their assets within reach and make quick and easy transactions. Other solutions offer even more security by taking the keys offline wholly. A custodian can keep the private keys on paper or a hard disk that is not connected to the internet.
A custodian is also necessary when it comes to regulations. In certain jurisdictions, investors have to hold assets with a qualified custodian if they reach a specific value. For example, the SEC in the United States required institutional investors to place their holdings with an asset’s value of more than $150,000. The SEC argued that they have concerns about how a fund would prove ownership and protection of digital assets. As digital assets develop, regulations are going to change as well. There is not a lot of regulation around storage cryptocurrency just yet. Once there are standards, it’s predicted that cryptocurrency will fully integrate into the economy.
Not only are digital asset custodians making it easier for a new generation of investors to expand cryptocurrency, but it’s also giving access to the established interstitial investors to enter the crypto space for the very first time. With the increased regulations, investors that were limited to holding assets and securities with qualified custodians are no longer held back. With increasing regulations, investors have more choices and will see more choices of custodians appear, increasing the amount of wealth held on the blockchain.
While digital asset management has developed dramatically, there is a prosperous future for cryptocurrency custody. Many see the technology being developed around these services will bridge the gap between traditional institutional investment banking and the developing cryptocurrency world. One country that has embraced cryptocurrency is Switzerland. Switzerland, known for wealth management and a strong currency, is also considered a crypto-friendly nation. Building on years of financial success, the country’s financial institutions have been working hard to create infrastructure to become a hotspot of global cryptocurrency investors.
Switzerland is also the home of Alpen Partners. We have deep relationships with institutions that have developed cryptocurrency custody. We work with our clients to find the best solutions for them. Cryptocurrency is not going away any time soon, and many of our clients realize they want to capitalize on this growing trend. Alpen Partners can help you begin and manage your crypto portfolio. Not only can our experts create a cryptocurrency portfolio used to grow your wealth or hedge your other assets, but we can also offer a full range of financial management needs. Contact Alpen Partners for cryptocurrency guidance, investment advice, asset management, and more
No matter the problem, Alpen Partners will handcraft a solution for you. We know that there is no one-size-fits-all when it comes to financial success. Our approach involves working with our clients to make a unique plan to meet their needs. Rest assured that we will work hard to guide you through the process of meeting your financial and personal goals.
Contact us to enhance your financial plan today.