Institutional custody explained

In self custody you hold the keys. Control is absolute and so is responsibility: a lost seed phrase or a compromised device usually ends the story. It suits people who hold modest amounts, transact rarely and are disciplined about backups.

Exchange custody is convenient and built for trading, but the assets are typically pooled and your claim is contractual. Institutional custody sits apart from both: assets are held under a defined legal arrangement, keys live in hardware, and every movement requires multiple independent approvals.

Keys are generated inside hardware security modules or split using multi-party computation, so a complete signing key never exists in one place at one time. The overwhelming majority of assets stay in cold storage that is not reachable from the internet, with a small hot balance for day-to-day withdrawals.

Movements out of cold storage require a quorum of approvers on separate devices, under separation of duties — the person who initiates a transfer is never the person who approves it. Withdrawal address allowlists and time delays add a further layer, so an attacker who compromises one credential still cannot direct funds anywhere new.

Segregation means client assets are recorded and held separately from the operating assets of the business, so they are not available to meet the firm's own obligations. It is a legal and operational arrangement, not just an accounting label.

Reconciliation is what proves it holds. Internal balances should be checked against on-chain holdings continuously, with any drift investigated. Published proof-of-reserves reporting takes that internal check and makes it verifiable from outside.

Custody insurance typically covers theft of assets from cold storage and dishonest acts by employees, often up to a policy limit that is smaller than total assets under custody. That structure is normal; the number to ask for is the limit and the covered perils, not the existence of a policy.

What insurance almost never covers is a fall in the price of your assets, or a loss caused by someone using your own credentials because you were phished. Access hygiene remains yours regardless of who holds the keys.

The answers should be specific, written and consistent with public reporting. Vagueness on any of these is disqualifying at institutional scale.

• Which legal entity holds the assets, and are they segregated?
• Are the assets ever lent, staked or rehypothecated?
• How are keys generated, stored and recovered?
• How many approvers are required to move funds?
• How often are balances reconciled and published?
• What are the insurance limits and covered perils?