In the wake of the FTX scandal, many crypto investors are taking a deeper look at the security of their assets. Since launching CoinMENA, we are proud to have BitGo as our custodian, the leader in digital asset security, custody, and liquidity, providing the operational backbone for more than 700 institutional clients in over 50 countries. In this blog post, we put together this primer on crypto custody and what differentiates BitGo from other custodians.
How the term “custody” gets used in crypto
In traditional finance, a “custodian” refers to an entity that holds the assets on your behalf and protects them against loss, theft, or misuse.
In crypto, however, the term “custody” tends to be used much more loosely. Many “custody” providers simply offer hot wallets and do not actually custody anything. Because they’re connected to the internet, these software solutions do a great job keeping funds liquid, but they also come with greater surface area for hackers to attack. The quality of the security technology backing the wallets can vary widely, too.
Ultimately, many “custody” providers are just giving you a tool to hold the assets yourself; they’re not actually holding them for you.
The concerns don’t end there, however. Even custodians who do hold your assets — including in offline cold storage — may still have the ability to misuse your funds. You hand them the keys and then hope they have your best interests at heart.
So, who do you trust?
Defining “qualified custody”
Unlike the more generic way “custodian” gets used in crypto, a “qualified custodian” means something much more specific, defined by regulators.
A qualified custodian is a regulated entity (like a bank or a trust) that:
Has a fiduciary duty to its clients
Holds client funds in segregated accounts
Meets rigorous regulatory standards and audits that help protect client funds against loss, theft, or misuse
Because whoever holds the keys controls the coins, working with a qualified custodian — rather than a mere “custodian” — becomes critical. You need to be able to trust your custodian, and a qualified custodian has a fiduciary responsibility to look out for your best interests.
Qualified custodians may offer a number of services that provide extra security, including:
Cold storage, where the keys are kept offline
Remoteness from bankruptcy, so your funds are protected if the company goes under
Segregated accounts, so funds are never commingled
Battle-tested security technology
Redundant human processes
Insurance against theft, loss, or misuse
Why CoinMENA Chose BitGo
BitGo offers both hot wallets and cold custodial wallets. We keep a small portion of our funds in hot wallets (<5%) for greater liquidity and the rest in cold storage for maximum security.
All our wallets divide keys into multiple pieces and require a minimum threshold to sign any transaction, meaning an attacker would need to compromise multiple keys in order to actually gain control.
Moreover, BitGo’s custodial wallets are provided by four regulated trust companies, each of which serves as a qualified custodian. BitGo also maintains up to $250M in insurance coverage against loss, theft, and misuse in situations where they hold all keys to a wallet.
At CoinMENA, the security and safety of our user’s digital assets are a top priority. Therefore we are proud to be partners with BitGo, the world’s leading digital assets custodial service.
BitGo provides the most secure and scalable solutions for the digital asset economy, offering regulated custody, borrowing and lending, and core infrastructure to investors and builders alike.
Founded in 2013 — the early days of crypto — BitGo pioneered the multi-signature wallet and later built TSS to improve upon other companies’ MPC offerings. Between multi-sig and TSS, BitGo offers the safest technology on the market and safeguards over 600 tokens across a wide variety of blockchains.
Over the years, BitGo has expanded from offering wallets into providing a full-suite solution that lets clients hold assets safely and then put them to work.
BitGo launched BitGo Trust Company in 2018, providing fully regulated, qualified cold storage to complement BitGo Inc’s original hot wallet solution. In 2020, BitGo launched BitGo Prime, which allows its clients to trade, borrow, and lend. Moreover, BitGo also provides access to DeFi, staking, NFT wallets, and beyond, and serves as the world’s sole custodian for WBTC, or wrapped Bitcoin.
Today, BitGo is the leader in digital asset security, custody, and liquidity, providing the operational backbone for more than 700 institutional clients in over 50 countries — a list that includes many regulated entities and the world’s top cryptocurrency exchanges and platforms. BitGo also processes approximately 20% of all global Bitcoin transactions by value.
For more information, please visit www.bitgo.com.