What Is Crypto Custody and How Does It Work in Singapore?

Crypto Self-Custody: Hot and Cold Wallets

Different types of investors require different types of crypto custody solutions. A , for example, might want a simple, relatively hands-off option, whereas an could require more customisation. Fortunately, there are a variety of options available, from self-custody options like a hardware or software wallet to third-party offline storage in a .

For those seeking complete control over their digital assets, a self-custody solution might be the best choice. This option affords you complete control of your cryptocurrency via a personal — a well-formed and unguessable number that grants you access to your assets. Within self-custody, there are two main types: 

• : These come in the form of , and online (browser-based) wallets. Their primary benefit is convenience and quick access to funds for trading and transacting.

  • Risk: Because they are connected to the internet, hot wallets are more vulnerable to online attacks. Risks include malware that steals your keys, phishing scams that trick you into revealing your key or seed phrase, and hacking of the device itself. 

• : These store your private key in a secure, offline hardware device. Transactions are signed within the device, so the private key is never connected to the internet. 

  • Risk: While controlling your own storage might sound appealing, there are inherent risks to this option, including the device being lost, stolen, or physically damaged (e.g., by fire or water). If you lose your hardware wallet and the backup seed phrase (recovery phrase) that came with it, your assets are permanently lost and cannot be retrieved.

Crypto Partial Custody

Partial custody refers to a self-managed wallet that offers a degree of third-party assistance in securing assets. This infrastructure can be as simple as or basic , where the third party possesses a key for co-signing the customer’s transactions.

Third-Party Digital Asset Custody

Third-party custody provides some of the highest levels of digital asset security. This solution could work well for individual investors as well as institutions. Within third-party custody, there are different types of security options to consider, depending on the type of user. 

Retail Custody

For most individual investors, “custody” simply means leaving their crypto assets on the exchange where they made their purchase (e.g., on an exchange like Gemini). This is a form of hot-wallet custody, as the exchange manages the private keys on your behalf, allowing you to log in with a username and password. 

In Singapore, the Payment Services Act 2019 (PSA) establishes a regulatory framework for digital payment token services, including requirements around risk management, consumer protection, and operational controls. 

Using a platform that operates in compliance with MAS regulatory requirements in Singapore is highly recommended. These entities are committed to the highest standards of compliance under MAS guidelines, including asset segregation, which prevents the exchange from using your assets for its own operations. 

Institutional Custody

Institutional custody is usually used by  , asset managers, hedge funds, and businesses that hold large amounts of digital assets. The security and regulatory requirements are much higher. 

These solutions are almost always built on offline cold storage systems. Keys are kept in physically isolated, air-gapped hardware devices,  stored in highly secure and geographically distributed vaults. These providers also provide:

• High-level security. Advanced cryptographic protocols, multi-signature requirements (multiple parties to approve a transaction), and robust physical security.

• Regulatory compliance. These custodians adhere to strict and requirements. 

• Insurance. Large insurance policies are typically provided to cover assets against theft or loss. 

• Reporting. Audit-ready reporting and statements are provided for accounting and compliance. 

is a prominent institutional solution. It operates as a qualified custodian under New York Banking Law, is ISO 27001 and certified, and includes $100 million in insurance coverage for assets in cold storage. A key feature is Gemini Instant Trade™, which allows institutions to trade their assets held in cold storage instantly on the , ensuring they don’t miss market opportunities while their assets remain secure.

Emerging Custody Models

The industry is constantly innovating to solve the trilemma of security, convenience, and control. New models are emerging, hoping to blend the best of self-custody and third-party custody. 

One of the most significant models is Multi-Party Computation (MPC). Instead of creating a single private key (which creates a single point of failure), MPC is a cryptographic technique where a key is split into multiple “shards”. These shards are distributed among different parties (e.g., you, a custodian, a trusted third party). 

To sign a transaction, a certain number of these shards must be brought together, but the key itself is never reconstructed in one place. This means a hacker cannot steal your funds by compromising a single device, and you cannot lose your funds by losing a single shard. This technology is becoming a popular choice for both institutions and retail users who want enhanced security without the complexity of a traditional hardware wallet. 

Which Custody Option Is Right for You?

Choosing the right custody solution depends on your goals, technical comfort, and investment amount. 

• Self custody (hot or cold): You are technically proficient, believe in the crypto ethos of “not your keys, not your coins”, and are willing to take full, personal responsibility for the security of your assets. A cold wallet is the gold standard for long-term “ing”. 

• Retail third-party custody (exchange): You are new to crypto, prioritize convenience for buying and selling, and are investing a smaller amount. Using a MAS-compliant platform in Singapore is highly recommended. If you’re just starting out, here’s a guide on . 

• Institutional custody: You are a corporation, fund, or high-net-worth individual managing significant assets. In this case, the need for regulatory compliance, insurance, and robust security protocols is non-negotiable. 

It is no secret that third-party crypto custodians need to be technical experts in cryptography, finance, and security, with air-tight regulatory and compliance safeguards in place. 

Whether you’re just beginning your crypto journey or are a seasoned investor in digital assets, the rapidly changing landscape means that new offerings are coming to market every day — digital asset custody solutions are also making it easier and safer to invest. 

and start trading securely.