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Custody in crypto refers to the safeguarding of digital assets (such as Bitcoin or Ethereum) by a third-party custodian on behalf of its owner. They are crucial because cryptocurrencies are stored on digital wallets, which can be vulnerable to hacking, theft, and loss if not adequately secured.

Custody services come in many forms, including:

  • Self-custody: this is the state in which people own their own private keys.
  • hot storage custody: when a custodian holds digital assets in a online wallet that is easily accessible and allows for quick transactions.
  • Cold storage custody: custodians store digital assets offline. Wallets provide greater security against theft and hacking.
  • Institutional custody: a custodian provides custody services to institutional investors who need high levels of security, like hedge funds, family offices or pension funds.