Title: Report by Luobing Xiong and Aspen Digital: Asian Institutional Investors Seeking Third-Party Custodian Solutions to Address Challenges and Opportunities in the Digital Asset Ecosystem
Hong Kong, July 11, 2023 - Wealth-tech platform Aspen Digital and PwC have jointly released the "Digital Asset Custody Report". The report points out that the demand for institutional-grade digital asset custody solutions is increasing among Asian family offices, high-net-worth individuals (HNWIs), and external asset management companies (EAMs) to protect their held digital assets and seize new investment opportunities.
In the past decade, digital assets have developed into a $1.2 trillion market and have become an alternative asset class. As of April 2023, there are over 120 digital asset custodians in the industry. While self-custody solutions allow institutions to have full control over their digital assets, more and more institutions realize the limitations of self-custody solutions in meeting their ongoing trading and operational needs. Instead, many institutions prefer to use third-party custodians.
According to PwC's 2022 Metaverse Survey, 82% of executives hope to integrate the metaverse into their business within three years. However, the latest report reveals that most non-fungible token (NFT) custody services are self-custody solutions, posing challenges to institutions that are new to the digital asset industry.
As a result, digital asset custodians have expanded their roles beyond cryptocurrency custody to help investors explore and participate in new business opportunities and asset categories such as decentralized finance (DeFi), NFTs, and the metaverse. It is expected that more third-party custodians worldwide will focus on enhancing their technological capabilities and service levels in the future.
Duncan Fitzgerald, Co-Managing Partner of PwC Hong Kong's Digital Assets and Web3, emphasizes the importance of asset security in the digital environment.
"Safeguarding assets and ensuring proper segregation is a fundamental requirement. This has long been recognized in the traditional securities industry. Now, reliable solutions have emerged within the digital asset ecosystem, which is encouraging."
Elliott Andrews, CEO of Aspen Digital, states that investors are more willing to invest in custodial services due to security concerns and generally believe that they need to have a better understanding of custodial solutions.
"For institutional investors looking to allocate digital assets, understanding the unique characteristics of these custodial solutions and their differences from traditional assets is one of the biggest barriers."
"To seize investment opportunities and avoid significant asset losses, institutional investors should adopt a systematic and formal approach to select the appropriate third-party digital asset custodian."
Despite the continuous growth in demand for institutional-grade digital asset custody services, family offices and high net worth individuals still have reservations about adopting custodial solutions. Respondents identified their main concerns when seeking reliable third-party custodians, which include ensuring asset security, navigating regulatory oversight of digital assets in different jurisdictions, and providing comprehensive insurance coverage.
Digital asset custodians are therefore addressing security risks through advanced technologies such as multi-party computation, staying abreast of evolving regulatory developments, and actively responding to market demands for insurance coverage of different types of digital assets.
The survey for this report was conducted in the second quarter of 2023, incorporating views from family offices, high net worth individuals, and external asset management companies in Asia. The report also includes in-depth follow-up interviews to further understand perspectives on adopting custodians.
Aspen Digital will host a seminar on August 14, 2023, together with industry experts to explore digital asset custody solutions for institutional investors. For more details, please visit Aspen Digital's LinkedIn page.
About Aspen Digital
Aspen Digital is a comprehensive digital asset wealth tech platform that serves wealth managers, family offices, and high net worth individuals. Backed by blockchain and traditional investors including Everest Ventures Group, TTB Partners, RIT Capital Partners (formerly Rothschild Investment Trust), Liberty City Ventures, and Token Bay Capital, they provide technology and expertise to help clients build their digital asset investment portfolios.
For more details, please visit: https://www.aspendigital.co/
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