How businesses should approach digital asset custody

As more businesses hold and use digital assets, custody has become an operational question as well as a security one.

Companies need to decide who controls their assets, how transactions are approved, how access is recovered and how every action is recorded. The right custody model must protect funds while supporting the company’s governance, treasury and compliance requirements.

This article explains the main digital asset custody models and how businesses can assess which approach is right for them.

What is digital asset custody?

Digital asset custody refers to the systems and processes used to protect and control access to cryptocurrencies, stablecoins and other blockchain-based assets.

Because digital assets are accessed through cryptographic keys, custody is not limited to storage. For businesses, it also includes:

• User access and permissions
• Transaction approvals
• Key protection and recovery
• Separation of duties
• Audit records
• Business continuity

The way these responsibilities are distributed depends on the custody model.

Exchange custody

Exchange custody means leaving digital assets in an account managed by a cryptocurrency exchange.

The exchange controls the private keys, while the business accesses its funds through an online account.

This approach can provide convenient access to trading and asset conversion. However, the company depends on the exchange’s availability, policies, supported assets and withdrawal procedures.

Exchange custody may suit short-term trading activity, but it may not provide the governance and operational controls required for corporate treasury management.

Third-party custody

With third-party custody, an external custodian safeguards the digital assets on behalf of the business.

This can reduce the technical responsibilities managed internally and may provide institutional reporting, support and regulatory coverage in certain jurisdictions.

However, the custodian retains control of the key infrastructure. The business remains dependent on the provider’s licence, risk policies, asset coverage and approval procedures.

This model may suit companies that prioritise external safekeeping, but it can be restrictive for businesses that need to move assets regularly.

Traditional self-custody

Traditional self-custody allows the business to control both its assets and the infrastructure used to protect its private keys.

This can involve hardware wallets, recovery phrases, offline backups, multisignature wallets or internally managed key systems.

The business retains direct control, but it must also manage:

• Key generation and storage
• Signing devices
• Recovery procedures
• Employee access
• Transaction approvals
• Operational security

A setup based on one device, employee or recovery phrase can create key-person risk. For businesses with several users or regular transactions, traditional self-custody can become difficult to manage.

Read the Fortris guide to digital asset self-custody for institutions for more detail.

Client-controlled custody: the Fortris model

Client-controlled custody is Fortris’ own custody model, created for businesses that want to retain control of their digital assets without building the entire custody infrastructure internally.

The business controls its funds, while Fortris provides the technology required to manage:

• Secure key infrastructure
• Role-based permissions
• Transaction approvals
• Recovery procedures
• Account policies
• Audit records

Unlike third-party custody, Fortris does not take control of the customer’s assets. Unlike traditional self-custody, the business does not need to manage every technical component itself.

With Fortris client-controlled custody, custody is structured around the company’s internal governance rather than around one wallet or individual key holder.

Teams can separate the responsibilities for creating, reviewing and approving transactions, making custody part of the company’s financial controls.

What should businesses consider?

The right custody model depends on how the company plans to hold and use its digital assets.

Control of funds

Businesses should establish who ultimately controls access to their assets and whether withdrawals depend on an exchange or custodian.

Governance

Corporate custody should support multiple users, defined roles and approval policies. Clear digital asset governance controls can reduce dependence on a single employee.

Security and recovery

Companies should assess how keys are protected, how users authenticate and how access can be restored when a device or employee becomes unavailable.

Learn more about the Fortris approach to digital asset security.

Auditability

Every custody action should be recorded, including who created, reviewed and approved a transaction. These records also support digital asset accounting and reconciliation.

Operational use

A company holding assets as a long-term reserve will have different requirements from one using digital assets for payments, settlements or transfers between entities.

Custody should therefore be considered alongside the wider digital asset treasury management process.

From custody to treasury operations

Custody protects and controls digital assets. Treasury management determines how those assets are organised, moved, approved and recorded.

Businesses operating with digital assets may need to:

• Organise wallets across entities or teams
• Monitor balances
• Apply approval policies
• Send and receive payments
• Transfer funds between accounts
• Reconcile transactions
• Export records for accounting

Fortris connects client-controlled custody with treasury, governance, payments and reporting within the same platform.

Choosing a digital asset custody model

Exchange custody may suit businesses that need access to trading. Third-party custody may suit organisations that want an external institution to safeguard their assets. Traditional self-custody may suit teams with the resources to manage their own infrastructure.

Fortris client-controlled custody is designed for businesses that want to retain control of their funds while using an established system for security, permissions, approvals and recovery.

Explore the Fortris digital asset custody solution.

Want to learn more? Book a demo today.

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