Future of Crypto Custody

As institutional adoption of digital assets grows, custody models are changing. New regulations are emerging. Threats are becoming more sophisticated.  

Institutional investors managing digital assets face a series of challenging questions: 

• What are the rules? Regulatory guidance has often been limited or fragmented, leaving institutions navigating uncertainty as they work to stay compliant.

• Is it safe? History is littered with high-profile hacks, exchange bankruptcies, and investors who lost access to funds by misplacing private keys.  

• Is it functional? Institutions have employees across departments and regions who may need access; balancing security with speed and operational efficiency isn’t easy.  

In the early days, self-custody was the only option. But now, the majority of investors rely on exchanges to manage their keys.  

And what does the future of crypto custody look like? As institutional adoption increases further, regulated qualified third-party custodians, in combination with self-custody hybrid solutions, will have important roles to play.  

Key Takeaways

• Since the first-ever Bitcoin exchange-traded fund (ETF) launched in 2024, full-service custody demands are growing. Institutions expect compliance, robust security, and operational efficiency from their partners. 

• The US Securities and Exchange Commission (SEC) actively solicits stakeholder input to develop the next generation of crypto custody regulations. 

• The specific results are not yet known, but regulated qualified custodians will undoubtedly be essential for institutional investors. The SEC considers custody rules to be the gold standard of investor protection and will likely incorporate those principles from traditional finance into future crypto regulations.

• Hybrid custody models will remain common. Institutions balancing regulatory compliance and security with flexibility and speed will do so by combining self, third-party, and exchange-based custody.  

The regulatory treatment of self-custody is an open question under active consideration by the SEC.  

Growing Institutional Demand for Custody

January 2024, when the SEC approved the first-ever Bitcoin exchange-traded fund (ETF), marked a turning point for institutional adoption. Regulatory approval meant money managers could participate in the Bitcoin market, without the friction of directly handling crypto, under a framework that felt familiar and safe.  

Since then, a dozen or more ETFs have been approved, and another 72 were pending as of April 2025. According to the CEO of the blockchain data analytics firm CryptoQuant, Ki Young Ju, more than 30% of all known Bitcoin is held by either ETFs or government bodies.  

In the wake of the SEC’s 2024 announcement, the Nasdaq published an article capturing the feeling of the moment: 

“The market is actively evolving into one that institutions can readily embrace. … The significance of the industry’s transition from an alternative financial system to a regulated and predictable environment cannot be overstated.” 

With the approval of Bitcoin ETFs, the need for institutional crypto investor solutions grew. While the SEC does not classify Bitcoin as a security, it nevertheless requires institutions holding digital assets on behalf of clients to use qualified custodians.  

As institutional adoption has deepened, the future of crypto custody has become defined by the search for secure, compliant, and operationally efficient providers. 

Evolving Regulatory and Compliance Standards

Regulatory frameworks for digital assets have historically lagged behind market innovation. In many cases, institutions seeking to offer digital asset services faced limited formal guidance and heightened enforcement risks.  

This left registered investment advisers (RIAs) motivated to offer digital wealth management (and other institutions interested in cryptocurrency) with a challenge: How can they legally hold crypto on behalf of clients while remaining compliant?  

However, crypto trends and regulatory developments in 2025 may provide greater clarity.  

President Donald Trump has directed a working group to propose a federal regulatory framework for governing digital assets, and two notable changes to guidance have already been made:  

• The SEC declared that neither crypto mining nor meme coins are considered securities transactions and thus do not fall under their regulatory jurisdiction. 

• Staff Accounting Bulletin 121, requiring public companies holding client cryptocurrency to record assets as liabilities on their balance sheets, was repealed. The change allows publicly traded financial institutions to act as crypto custodians without a negative impact on their balance sheets.  

The work of the “crypto task force” is ongoing. On April 25, 2025, the SEC held a public roundtable with institutional stakeholders specifically focused on addressing the challenge of regulating crypto custody. Questions they considered include:  

• Can existing law be modified to accommodate cryptocurrency markets, or is a brand-new framework necessary?

• Would allowing adviser self-custody—where an investment adviser directly holds client crypto assets—invite fraud, theft, or misappropriation? 

• Should exchanges or broker-dealers be allowed to custody crypto assets in omnibus wallets (shared wallets holding assets for multiple clients), or should they be required to segregate client assets into individual wallets?  

The outcome will come in time, but it appears that transparency, due diligence, and clarity will be at the center of future crypto custody regulations. 

Institutional investors should explore regulated, qualified custodians in anticipation of future changes. Not only will third-party service providers help institutions stay ahead of evolving compliance standards, but preparing in advance ensures they’re ready to react immediately once clearer rules emerge. 

Expectations for Full-Service Custody Solutions 

Financial organizations face a delicate balancing act. How do they secure assets against digital threats and remain in regulatory compliance while maintaining the speed, flexibility, and asset diversity that their operations require?  

Look for qualified custodians that are SOC 1 and SOC 2 certified. These accreditations, issued after audits and conferring the opinion of a certified public accountant (CPA), indicate that an organization utilizes the highest standards of security and financial controls.  

The gold standard of security for full-service custodians includes cold storage of private keys, multi-signature approval, and multi-factor authentication (MFA). Equally important, custodians should legally separate client assets from trading operations and provide insurance against theft, loss, or misuse.  

Performance matters as well.  

Institutions often need to settle large trades quickly, and leading custodians do so while helping them avoid slippage. Off-exchange settlement, over-the-counter (OTC) trading, and deep liquidity allow for discreet, competitive transactions.  

Additionally, staking services can help generate yield on certain assets without compromising security. Advanced platforms enable integration of internal trading systems with their external custodian. 

BitGo is at the forefront of crypto custody trends. Its security practices exceed global regulatory expectations, and it offers high-touch customer service, deep liquidity, and easy-to-integrate trading APIs. For institutions interested in navigating crypto markets with confidence, working with a regulated, qualified custodian like BitGo offers protection and positions them for growth.  

Finding Hybrid Custody Solutions

Institutional custody solutions are not a one-size-fits-all 

For instance, a pension fund holding Bitcoin as a strategy to hedge against inflation might prefer a qualified third-party custodian. Cold storage, combined with insurance coverage and segregated accounts, ensures these large but inactive holdings are both secure and compliant with regulatory expectations.  

Alternatively, an active trading firm might prefer a self-custody wallet for a portion of its assets, allowing it to quickly deploy funds without a third party’s approval mechanism.   

Crypto custody trends indicate many companies are using a hybrid approach, mixing self-, third-party, and exchange-based custody solutions to match their preferences. By doing so, firms can retain control over certain assets while leveraging third-party custodians for regulatory support and exchanges for liquidity and operational convenience. 

Future Crypto Custody Trends

The future of crypto custody is coming. Institutional demand continues to rise, the SEC is pushing toward regulatory clarity, and third-party custodians are paying close attention to how they can best serve clients while responding proactively to new legal frameworks.  

And BitGo is a leader in regulated digital asset custody.  

As a qualified custodian, BitGo provides secure infrastructure, deep liquidity, and 24/7 global customer support. Its custody platform bridges regulatory compliance with technological innovation, enabling institutions to securely hold their digital assets while exceeding evolving legal standards.  

The BitGo blog provides ongoing insights into the latest crypto news and trends. 

FAQ

How are digital assets being secured in the future?

Qualified custodians use advanced protections like cold storage, multi-signature wallets, and multi-factor authentication to secure digital assets. Custodians with SOC 1 and SOC 2 certifications are at the forefront of cybersecurity standards and financial controls. Read about the different types of custody wallets to learn more. 

What trends are emerging in the crypto custody space?

Regulatory clarity for custodians may be on the horizon. President Donald Trump’s cryptocurrency working group has until mid-July to submit a proposal for a new regulatory framework, and the SEC held a public roundtable inviting stakeholder input on crypto custody on April 25. Additionally, institutions are increasingly interested in qualified custodians to meet their needs. 

What should investors and institutions know about the future of crypto custody?

Institutions should know that new regulations are actively being developed in the US. The details are still unclear, but qualified custodians will be essential for institutional investors who want to hold crypto assets on behalf of clients. The SEC considers custody rules to be the gold standard of investor protection and will undoubtedly incorporate similar principles into future regulations.