The crypto custody market size reached $448 billion in 2022. However, cryptocurrency custody providers still lack some important characteristics to increase institutional investors’ interest in the digital asset market.
According to a study conducted by consulting firm PricewaterhouseCoopers (PwC) in conjunction with Aspen Digital, institutional investors are increasingly interested in crypto staking and the non-fungible token (NFT) market. But the level of adoption of digital assets on their part remains low because the storage methods aren’t secure enough.
The study reported that the global digital asset custody market was valued at $447.9 billion in 2022, which is only about 37% of the total crypto market cap last year. On the other hand, according to CoinGecko, there are over 9,000 different types of cryptocurrencies, and there were only 120 custody providers as of April 2023, Aspen Digital reported.
With the growing interest in the market, family offices, HNWIs, and EAMs are looking for reliable custody solutions for digital assets. The study authors identified three key challenges for the custody industry:
- Security. Private investors are often reluctant to entrust their assets to crypto exchanges due to a lack of transparency along with uncertainty in the management structure of CEXs. The growing level of attacks on cryptocurrency wallets and exchanges also leads institutional investors to turn away from investing in digital assets.
- Regulation. Regulatory uncertainty surrounding the operations of digital asset custody providers in various jurisdictions is a significant hurdle for some investors.
- Insurance. The lack of any guarantees by most crypto custodians in case of asset loss or theft also greatly affects the interest of institutional investors.
On the other hand, the authors emphasize the fact that self-custodian solutions don’t meet the needs of institutional investors. This is why developing secure ways to custody digital assets is a key factor for the growth of institutional adoption.
Even despite the decline of the crypto market this year, institutional investors continue to believe in its prospects and plan to increase the volume of digital assets in their investment portfolios over the next three years.
