The custody revolution asset managers can’t ignore

For decades, asset custody has been managed through a web of intermediaries, including banks, brokers, clearing houses and registries, each playing a role in verifying ownership, settling trades and ensuring assets are secure. This model, while time-tested, carries inherent inefficiencies and vulnerabilities. More importantly, traditional models aren’t suitable for digital assets, which operate in an emerging ecosystem that is outpacing conventional custody protocols.

Delays in settlement, reconciliation errors and single points of failure have long been accepted as the cost of doing business in the custody world. However, blockchain technology challenges these assumptions by combining cryptographic security, decentralised record-keeping and real-time verification. As we think about what the future of custody looks like, it’s increasingly becoming clearer that blockchain technology enables a model of custody that’s more resilient, transparent and streamlined than anything the traditional system can offer.

Why custody matters more than ever in crypto

In traditional markets, custody is often an invisible background function. Investors do not typically think about where their equities or bonds are held because regulated custodians operate under long-established safeguards.

Crypto custody however, is primarily a service that provides secure storage and management of digital assets, by safeguarding the private keys. The private keys are like the password to your wallet and allows you to “sign” transactions to permit the withdrawal of assets from the wallet. If the keys are lost, there is no ability within the blockchain to recover them and assets attached to the wallet may be lost forever.

Aside from protecting your keys from loss, it is also important to prevent your keys from theft, being hacked and unauthorised access. That is where a regulated custodian like CloudTech Custody is different. We combine state of the art technology to secure the keys from loss with the risk management and resiliency processes of traditional financial institutions to protect unauthorised access to the wallet and ensure business resiliency.

As institutional investors, family offices, and asset managers allocate more capital to crypto, the need for these robust custody solutions becomes more critical. Without strong safeguards, such as those provided by a full-service regulated custodian, investments remain vulnerable to misuse, such as what we saw in the fallout of global exchange platform FTX. In this scenario, appropriate liquid reserves that back the crypto investments were not held, meaning customer funds held in co-mingled wallets were misused and they were left powerless. A full-service custodian that offers segregated wallets will ensure customer assets are secure both physically and legally providing enhanced confidence in the crypto-financial ecosystem.

Speed, efficiency, and security through blockchain

Crypto custody doesn’t just protect assets; it transforms the very process of asset management.

1. Faster settlement: Traditional asset transfers often take two to three business days, due to clearing and reconciliation. Blockchain enables near-instantaneous settlement, reducing counterparty risk and freeing up funds for other investments.

2. Efficiency gains: By operating on a shared, immutable ledger, crypto custody removes the need for multiple reconciliations between intermediaries. Every party to a transaction views the same record in real time, eliminating discrepancies and administrative costs.

3. Enhanced security: In traditional custody, assets are ultimately controlled by centralised entities vulnerable to insider fraud, cyberattacks, or systemic failure. Blockchain distributes control across a network, making it significantly harder for any single point of attack to compromise the system. Private keys can also be split into multiple parts, encrypted and stored in secure, online and offline environments each held by separate entities, ensuring no single party has full control.

Beyond crypto to all asset classes

While crypto assets have been the focus of crypto custody, the infrastructure holds significant potential for broader adoption across traditional asset classes. An example of this could be equities, bonds and even real estate titles being tokenised on a blockchain to enable secure, transparent and efficient ownership representation.

Using equities as an example, a share of a public company could be bought, sold, and settled in seconds, without the involvement of multiple clearing agencies. Corporate actions like dividends and voting rights could be executed automatically through smart contracts, reducing administrative friction and improving transparency for all stakeholders.

For asset managers, this would mean faster reporting, lower operational costs and greater flexibility in portfolio construction. For regulators, it would mean a permanent record for every asset transfer, a significant leap forward in market integrity in an environment where this is increasingly front of mind.

The road to adoption

Of course, integrating crypto and other digital assets into mainstream asset management will require more than just technological readiness. Regulatory clarity for all participants from asset providers to custodians and advisers will be key. The appetite from investors is there and continually increasing.

As providers of blockchain custody solutions at CloudTech Group, we recognise that represents more than a technological upgrade, it’s a rethinking of how asset ownership is defined, recorded and protected. For crypto assets, it offers the most secure and operationally efficient solution. For the wider financial markets, it’s a glimpse into a future where settlement is instant, transparency is universal and custody is no longer a bottleneck but a competitive advantage.