Definition
In digital assets, custody concerns who holds effective control of signing keys and how that control is exercised. A custodian may safeguard assets for customers, while self-custody leaves control with the owner. Technical control and legal ownership are related but different questions: holding a key does not by itself settle every contractual claim over the assets.
How It Works
A custody setup can include offline storage, multiple approvals, key-share separation, transaction screening and recovery procedures. Providers may keep customer balances on separate addresses or in pooled accounts with internal records. The design should explain who can authorize movements, how access is monitored and what happens when devices, staff or systems fail. No single technology describes every custody service.
Key Considerations
Evaluate the entire arrangement rather than one marketing label. Segregation, withdrawal access, reporting and contractual treatment should be checked separately. Proof of some asset holdings does not by itself establish all liabilities or an institution’s ability to honor every claim. Strong cryptography also cannot prevent all operational fraud or accounting errors. For self-custody, continuity and backups remain essential; for third-party custody, security and counterparty exposure both matter. Avoid assuming that regulated, insured or institutional means unlimited protection without reviewing the actual scope.