What is Custody?

Custody refers to the legal ability for a financial institution to hold and protect financial assets for its customers with the aim of preventing asset theft or loss. Custodians may hold assets in both electronic and physical form. Because they are responsible for safeguarding assets for many customers (potentially worth billions of dollars), custodial firms tend to be extremely large and reputable institutions. With cryptocurrency and blockchain custody solutions, custodianship may also include the management and safekeeping of a customer's private keys. Cryptocurrency exchanges often custody their customers' private keys and cryptocurrency holdings.