9 hours Ago By Dan Yoo
The evolving landscape of institutional digital asset custody is becoming a crucial focus for global financial markets. As cryptocurrencies integrate into the economy, secure and compliant custody solutions are imperative. This interview delves into the SEC's Crypto Custody Roundtable, examining whether these discussions will unlock institutional investments or present new challenges.
With insights from Palisade, a key player in digital asset management, we explore how innovative custody approaches are setting the groundwork for the future. The article highlights global regulatory trends and the critical role of the SEC in balancing consumer protection with technological advancement. As custody solutions become foundational in the Web3 ecosystem, they are poised to drive next-generation financial services, from DeFi to NFTs.
We explore how these dynamics are shaping the future of digital asset management. --Ed. Q: What is institutional digital asset custody? A: Institutional digital asset custody is the secure management of digital assets, like crypto and tokenized securities, by a trusted, regulated third party.
At its core, it means safeguarding the private keys that control access to those assets, protecting them from hacks, theft, and loss. Traditional, self-custody offers control but can often lead to chaos. It has inherent risks and is best suited for everyday investors with a small amount of crypto.
On the other hand, institutions that hold millions—or billions—of their customers’ digital assets need to invest in more secure custody solutions. This is where institutional digital asset custody comes in. They hold digital assets on behalf of these institutions in a regulated and highly secure manner.
With such high stakes and no margins for error, security is best left to the experts. Q: Please introduce yourself and Palisade’s core mission in the digital asset space. A: Palisade is one of these digital asset custodians.
Our mission is to empower businesses with a fortified, holistic, and buildable solution for the secure stewardship of their digital assets. We are different in how we approach custody. To us, it is not simply about holding digital assets.
It is about creating a secure custodial foundation that Web3 applications can be built on top of. Our core suite of custodial services includes secure wallet provisioning, flexible deployment models, multi-blockchain support, business continuity and disaster recovery, built-in compliance, and highly adaptable governance and policies. We know institutions require more than just secure storage—they demand a comprehensive solution encompassing robust security protocols, stringent compliance frameworks, and seamless operational efficiency.
Q: How important is security to digital asset custody, and what security mechanisms should custodians be implementing? A: Security is absolutely foundational to digital asset custody—it is not just a feature, it is the product. In the world of digital assets, there is no margin for error. Unlike traditional finance, where asset recovery mechanisms exist, the self-sovereign nature of crypto means that a compromised private key can result in irreversible loss.
For institutional clients, the stakes are simply too high for anything less than best-in-class security. At Palisade, we take a security-first approach to every layer of our custody infrastructure. That begins with the implementation of MPC, a cutting-edge cryptographic technology that eliminates single points of failure by distributing key shares across multiple secure environments.
This allows us to sign transactions without ever assembling a full private key. Strong governance and policy controls are also essential. To ensure internal compliance and minimize unauthorized actions, institutions must define granular user roles, transaction thresholds, and approval workflows.
Custodians must also integrate secure hardware, air-gapped storage, real-time monitoring, and incident response protocols, alongside comprehensive KYC/AML processes to prevent illicit activity. Q: Crypto regulations are being developed across the world. Which countries stand out for having clear rules to work with? A: The EU has its well-known MiCA framework, which sets out clear rules for crypto.
Other jurisdictions are doing similar, for example, Hong Kong has introduced a Stablecoins Bill, which has established licensing rules, fostering innovation while ensuring that consumers are protected. Singapore has strengthened its Payment Services Act, which has enforced stringent compliance rules for digital payment token holders. Regions including Vietnam and the UAE have been finalizing their crypto regulatory frameworks, prioritizing innovation with legislation that avoids creating friction, aiming to become leading global financial hubs.
Q: With its neighbor, the EU, having developed the MiCA framework, where does the UK, a hub of traditional finance, stand when it comes to crypto regulations? A: The UK has adopted a cautious approach to crypto regulations. Some argue this ‘wait and see’ approach will give the UK an edge on the global stage once it finally publishes its regulatory framework in 2026. But in reality, this risks sidelining the UK in the global digital asset economy.
The UK lacks urgency, and this is leaving businesses in uncertainty, ultimately undermining the UK’s credibility as a crypto hub. The UK government needs to act quickly to implement clear regulations or risk losing its competitive edge to jurisdictions with well-defined rules. Q: The SEC is actively seeking input as it develops its crypto rules.
What should US regulators be talking about? A: As US regulators, including the SEC, shape the future of digital asset regulation, it is critical that the conversation strikes the right balance between consumer protection and innovation. The regulatory framework must safeguard market integrity and investor interests without stifling the technological progress and business models that are redefining global finance. Clear, consistent security standards for digital asset custody are essential.
The unique risks of managing cryptographic keys, decentralized protocols, and 24/7 global markets demand more than retrofitted traditional finance rules. Regulators should prioritize setting robust, tech-agnostic requirements around key management (including the use of MPC and other secure cryptographic methods), operational resilience, and incident response protocols. Regulatory harmonization is equally as important.
The global nature of crypto markets means that fragmented rules across jurisdictions risk creating regulatory arbitrage or operational uncertainty for compliant firms. US policymakers should actively collaborate with international counterparts, especially in jurisdictions like the EU, UK, and Singapore, to align standards around custody, AML/KYC, token classifications, and disclosures. Q: Custody is evolving beyond just asset security.
How is it shifting to be focused on being a foundation for the development of Web3 applications? A: Digital asset custody is undergoing a fundamental transformation. What began as a means to securely store private keys has evolved into a critical layer of infrastructure for the broader Web3 ecosystem. As Web3 applications grow more complex and interconnected, developers and institutions require secure, compliant, and programmable access to digital assets.
Custodians are stepping up to meet this demand by offering API-first platforms, advanced policy engines, and multi-chain interoperability that allow secure interactions with smart contracts, decentralized protocols, and tokenized assets. This evolution is especially important for use cases such as automated DeFi participation, NFT marketplaces, tokenised RWAs, and on-chain governance. Custody providers are enabling these applications to operate within institutional-grade guardrails, delivering secure transaction workflows, auditability, and regulatory compliance.
Furthermore, people are demanding a more seamless user experience. They want the functionality of Web3 wallet with the ease of use of Web2, which is essential for the mass adoption of blockchain. This demand is being reflected in the way custody providers design their wallets.
Q: What does the future look like for institutional digital asset custody? A: As digital assets move from the periphery to the core of financial services, custody will evolve from a protective layer into a strategic enabler, powering everything from tokenized finance to real-time, cross-border settlement. I expect that custody solutions will become more programmable, interoperable, and compliance-native, supporting seamless interaction across chains, protocols, and jurisdictions. Enhanced automation, embedded risk controls, and real-time auditability will define next-generation custody infrastructure.
The last five years have been monumental for institutional digital asset custody. The next five will be even more so. Palisade is a provider of digital asset custody and wallet infrastructure, delivering highly secure, compliant, and scalable solutions for blockchain-based businesses.
The company focuses on transaction governance, private key management, and regulatory compliance to help clients securely manage their digital assets. Co-founded by Tom Kiddle and backed by Ripple, Palisade is at the forefront of digital asset security, shaping the industry's future. Tom, a seasoned software engineer and entrepreneur with extensive experience in e-commerce, payments, and blockchain from companies like Ripple, Apple, and BT, leads Palisade with a vision to revolutionize digital asset management and provide a solid foundation for business growth in the Web3 ecosystem.
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