How BitGo’s Regulated Crypto Custody Provides Institutions with a Competitive Edge

From individuals to large institutions, many investors remain cautious when entering the world of digital assets. Positive sentiment is gaining ground, fueled in part by the emergence of registered vehicles such as Bitcoin exchange-traded funds (ETFs), but hesitation persists. 

Past high-profile losses due to fraud, cybercrime, and technical missteps highlight the critical need for secure and compliant solutions. Each headline reinforces the same conclusion: Safe participation in digital assets demands working with a trusted, regulated crypto custody provider. It demands custody solutions that meet the regulatory and operational standards rivaling those of traditional finance. 

That’s where regulated crypto custody enters the picture. It’s an industry term for cryptocurrency service providers offering top-level compliance and security to keep every cryptocurrency coin and token as safe as possible.  

Here’s a look at how regulated crypto custody platforms like BitGo are designed with the needs of institutional investors in mind.  

Key Takeaways

• Regulated custodians use independent audits and strict controls to protect crypto assets and meet compliance standards. 

• Essential security features include multi-signature wallets, segregated client accounts, insurance, and detailed recovery plans. 

• Leading custodians operate under regulated trust frameworks and update their processes as rules shift. 

• Transparent reporting tools and audit-ready systems give investors clarity and confidence in their holdings. 

Understanding Regulated Custody

While nearly anyone with an internet connection can create a cryptocurrency wallet, a typical consumer wallet is far from what institutions get with a regulated custody provider. Regulated custody is all about adhering to financial regulations and following industry best practices to ensure the most secure cryptocurrency experience. 

Common practices for institutional digital asset security include segregated client wallets and offline wallets (cold storage) requiring multiple authorized signatures for withdrawals. Regulated custodians also undergo thorough third-party audits to ensure compliance with internal policies and industry standards. 

A combination of transparency and security gives institutional investors and their clients confidence that their holdings are safely stored, available when needed, and backed even further by specialized insurance coverage. 

Crypto Custody Compliance and Security Standards

Mandatory standards remain limited, though cryptocurrency regulation is rapidly evolving. Institutional investors should stay apprised of new regulations from agencies such as the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN), and others. Working with a regulated crypto custody firm ensures ongoing compliance with jurisdictional mandates.  

Common compliance and security standards include: 

• Segregated Accounts: Client funds are never co-mingled with custodian funds. Transparent accounting and reporting can quickly demonstrate which assets are owned by investors. 

• Bankruptcy Protection: Custodied funds are structured to remain outside the custodian’s balance sheet and thus protected from creditor claims in the event of financial distress. 

• Cold Storage: Cryptocurrency keys are stored offline using hardware wallets that prevent malicious access via the internet. 

• Security Technology: Multi-signature cold wallets with key sharing and offline signing ensure that no single person can withdraw and that there’s no single point of failure. 

• Insurance: A quality insurance policy with cybersecurity and cryptocurrency coverage offers added financial protection against certain defined events of theft, loss, or misuse, subject to policy terms and limits.

At the same time they rely on these core security features, it’s also critical that institutions can access currency on short notice. After all, crypto markets operate 24/7, and being stuck with unfavorable positions while the market’s making big moves is not an option. An experienced, regulated crypto custody provider can help balance those priorities. 

How Qualified Custody Ensures Compliance

Crypto custody compliance can be complex. That’s why offloading digital asset custody to an expert partner can be beneficial. BitGo, for example, engages with regulators and constantly monitors for regulatory changes, providing clients with the infrastructure and expertise to support their efforts in achieving and maintaining compliance.

Some key services regulated crypto custody providers offer include: 

1. Audit-Ready Framework: Qualified custodians maintain SOC 1 and SOC 2 Type II attestations to validate security, availability, and confidentiality controls. These independent audits establish a solid foundation for crypto custody compliance. 

2. Insurance and Disaster Recovery: Look for providers with multi-party risk insurance, such as BitGo's policy, which provides coverage against certain defined risks, benefiting both the provider and clients, subject to policy limits and terms.

3. Multi-Signature Architecture and Geographic Diversification: Splitting signing authority across hardware security modules in different jurisdictions eliminates single-point failures and enforces strict operational controls, which is key to meeting compliance mandates. 

4. Transparent Reporting: Real-time dashboards, customizable access controls, and downloadable audit logs streamline know your customer/anti-money laundering (KYC/AML) reviews and regulator inquiries. Clear reporting tools mean institutions are always audit ready. 

5. Adaptable to Regulatory Change: As new rules like Europe’s Markets in Crypto-Assets Regulation (MiCA) or evolving U.S. guidance emerge, a qualified custodian updates its processes in lockstep. This ensures organizations maintain crypto custody compliance without building every control in-house. 

BitGo’s Role in Shaping Institutional Standards

BitGo is an industry veteran, its roots tracing back to 2013. It supports more than 1,110 crypto assets across more than 44 different blockchains. BitGo’s institutional cryptocurrency solutions combine technical depth with regulatory alignment to support institutional-grade custody and financial services. 

At the forefront of advocating for regulated crypto custody, BitGo is turning lessons from past market failures into a blueprint for institutional crypto security. As global regulators introduce clearer rules, like the SEC’s push for independent, qualified custodians, BitGo has led by example, maintaining strict audits, multi-party insurance, and segregated accounts to ensure investor assets remain safe. 

By operating multiple regulated trust companies worldwide, BitGo embeds fiduciary responsibility into every layer of its service. Its 2-of-3 multi-signature key architecture, geographically dispersed cold storage, and transparent audit logs exemplify the separation of trading and custody functions. 

BitGo’s commitment to best practices and ongoing dialogue with policymakers makes it a trusted voice. Discover how BitGo’s crypto custody solutions continue to shape industry standards and safeguard digital assets. 

FAQ

What is regulated crypto custody?

Regulated crypto custody is a digital asset solution in which a provider offers top-tier security and compliance that is aligned with industry best practices and the latest regulatory guidance. 

How do regulatory standards affect crypto custody services?

Digital asset regulations, in their relative infancy, are still taking shape. Congress has debated new cryptocurrency legislation, while agencies such as the SEC, CFTC, and FinCEN have issued evolving guidance for custodians. Failing to comply can lead to security vulnerabilities, regulatory actions, fines, and even the risk of being shut down permanently. 

What are the main features of a secure crypto custody solution?

A secure digital asset custody solution includes regular audits and transparency, multi-signature cold storage cryptocurrency wallets, segregated accounts, and insurance that protects client assets in the rare event of a security breach or technical failure. 

How does regulated crypto custody protect digital assets?

Regulated crypto custody ensures that custodians follow best practices to protect client assets. Like banks and stock brokers, industry regulations ensure a safer and more predictable experience for consumers and businesses. 

What should investors consider when selecting a custody provider?

Investors should evaluate a provider’s regulatory licenses where applicable, SOC audit results, insurance coverage, key‐management architecture, disaster‐recovery protocols, and operational transparency. Reputation, compliance track record, and responsive client support are equally critical for safeguarding digital assets.