Cryptocurrency coin toss up
What is a custodian, and why do we need one in cryptocurrency? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.
Answer by Matt Leitch, Social Media Marketer at Internet Pulse, on Quora:
Let’s start with a bit of history. There have been a few surveys done that show there are about 20 percent of family businesses worldwide that have invested in cryptocurrency and about 30 percent of family businesses in the United States have done so. Now, globally, about 50 percent of businesses are expressing interest in doing it.
Most of these businesses reportedly have significant capital to invest for the long term. In addition, most family businesses are expected to not only prosper but to reach new highs in their portfolios. Of course, diversifying their assets in order to look for new stores of wealth is their goal. Recently, the combination of rising inflation and rising interest rates are also negative contributing factors to this family project. Due to the many risks that they have to be aware of, such as volatility activity and possible regulatory changes in the law, that may be associated with the digital asset market requires family businesses to approach all investments with some caution.
Traditionally, capital market financial institutions have been expected to bear the burden of asset custodianship in that they are responsible for the care and guarding of investors assets. Other services they may be expected to provide are clearing house activities, trade settlement, exchange services and corporate action execution.
Minimizing the risk of fraud, theft or loss of the assets is the reason the custodians are entrusted for a limited time with the assets. Because of the accelerating investments into the crypto space recently, the demand for cryptocurrency custodians has grown exponentially. Due to the differences in cryptocurrency and fiat currency, there are tremendously different rules for handling crypto than fiat currency, and so are the rules for handling digital assets. This is one reason for the number of new assets and how they find value in the market and cause volatility, in my opinion.
Cryptocurrency custodians are responsible for the safekeeping of a client’s cryptocurrency assets. The big difference here is that the crypto custodians only hold the keys to these assets, not the assets themselves. The asset keys can be held in a cold wallet that only you have access to.
This question originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world.
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