In recent years, mainstream financial institutions such as BlackRock, BNY Mellon, DBS Bank, and Fidelity have entered the digital asset space to serve retail and institutional clients to satisfy their increasing interests, driving demand for secure asset custody. Forrester defines digital asset custody as:

Solutions that use technologies such as multiparty computation, hardware security modules, and multisignature to store and safeguard investors’ digital assets by managing and securing investors’ private keys. Digital assets are stored and recorded on the blockchain ledger and include cryptocurrencies, stablecoins, nonfungible tokens, central bank digital currencies, and security tokens.

The digital asset market in general and cryptocurrencies in particular have fluctuated significantly in the past two years. Bankruptcies of unregulated crypto players have disrupted the market and damaged investor trust. Companies entering or planning to enter the digital asset space seek regulatory guidance and protection. Digital asset custody plays a crucial role in strengthening investor trust and supporting the industry’s future development.

Yet despite its potential, digital asset custody is still a nascent industry, and financial institutions must carefully navigate many technical and procedural challenges. When discussing this topic with financial institutions that are interested in digital assets, we found that the most burning question is:

How can financial services firms ensure seamless integration of digital asset custody platforms with their existing systems?

In our newly released report, Digital Asset Custody: A Primer, we have addressed this, and our answer to this question can be briefly summarized as follows.

To ensure seamless integration of digital asset custody platforms, financial services firms should leverage APIs for integration with their existing systems. They can maintain and further develop their technology teams’ API integration experience and skills, or work with external vendors with strong API capabilities. Additionally, they should prioritize custody solutions that offer interoperability, allowing for smooth integration across different systems and avoiding data and compliance silos. Effective integration also requires collaboration between technology teams and other business and operational teams, including legal, compliance, and accounting, to address nontechnical aspects and streamline internal processes.

In the report, we also analyzed the key trends and drivers of the digital asset custody market, key tech supporting digital asset custody, the core capabilities of representative custody providers, and early good practices for integrating these solutions. To learn more details, Forrester clients can read the full report and schedule a guidance session or inquiry with me. I will also do a webinar on April 22nd to discuss more details and insights about digital asset custody. You can access the webinar via this link.