Top Tips for Securing Digital Assets with Crypto Custody Solutions

Securing digital assets requires careful selection of digital asset custody solutions and ongoing vigilance. Recent data shows a sharp rise in cyber threats targeting crypto, with 75 incidents and $2.1 billion stolen in just the first half of 2025. Attackers now use advanced methods, including social engineering and predictive technologies. Individuals and institutions face different risks in digital asset custody, so choosing the right custody solutions for crypto remains critical. The table below highlights the growing scale of these threats:

Key Takeaways

• Use cold storage and hardware wallets to keep your crypto keys offline and safe from hackers.

• Choose trusted custody providers that follow strict security rules and offer insurance for extra protection.

• Apply multi-signature or multi-party computation methods to require multiple approvals for transactions, reducing theft risks.

• Set clear access controls and regularly review permissions to prevent unauthorized use of your digital assets.

• Keep security policies updated, perform regular audits, and stay informed about changing regulations to protect your crypto holdings.

Custody Solutions for Crypto

Digital asset custody refers to the secure management and storage of crypto assets. This process protects private keys and ensures only authorized users can access funds. Custody solutions for crypto play a vital role in reducing risks from theft, hacking, or loss. Industry standards define digital asset custody through strict regulatory frameworks. For example, the Investment Advisers Act of 1940 requires institutional investors to use qualified custodians, such as banks or registered broker-dealers. Licensed providers like Coinbase Custody and BitGo Trust Company follow these rules and use both hot and cold storage to protect assets.

Self-Custody Options

Self-custody gives individuals direct control over their crypto. Users manage their own private keys, often with hardware wallets or secure software. This approach offers full ownership and independence. However, it also brings high responsibility. Losing a private key means losing access to digital assets forever. Self-custody solutions for crypto work best for experienced users who understand security risks and backup strategies.

Third-Party Custodians

Third-party custodians manage crypto on behalf of users. These custody solutions for crypto use advanced encryption, multi-factor authentication, and decentralized key management. They balance security and accessibility by using cold wallets for storage and warm wallets for daily operations. Third-party custodians also follow strict compliance controls, such as regular security audits and access controls. They enforce KYC, AML, and CTF protocols to maintain trust and service integrity.

Partnering with a trusted digital asset custodian provides institutional-grade solutions, operational agility, and transparency. These custodians offer peace of mind and strong protection against security threats.

Institutional Custody

Institutional custody solutions serve hedge funds, exchanges, and other large organizations. These crypto custody solutions must meet high regulatory and security standards. Trusted digital asset custodians in this space provide regular audits, proof of assets, and strict segregation of duties. Institutional custody solutions bridge the gap between traditional finance and the crypto market. They ensure digital assets remain safe, compliant, and accessible for large-scale operations.

Best Practices for Securing Digital Assets

Cold Storage and Offline Methods

Cold storage stands as one of the most effective ways to protect crypto from online threats. By keeping private keys completely offline, cold wallet storage removes the risk of internet-based attacks. Many experts recommend using air-gapped devices or hardware wallets that never connect to the internet. This approach prevents hackers from accessing sensitive information through remote exploits.

Offline custody often includes encrypted backups and one-way communication methods. For example, users can generate transaction signatures on an offline device, then transfer the signed transaction to an online device using a QR code or USB drive. This process ensures that private keys never leave the secure storage environment.

Cold wallet storage works best for long-term holdings and large balances. Always keep backup copies of recovery phrases in separate, secure locations.

Online storage introduces several vulnerabilities. Misconfigurations account for about 80% of security exposures. Other risks include credential theft, exposed access keys, insecure APIs, shadow IT, zero-day vulnerabilities, account hijacking, and insider threats. Security group misconfigurations and logging gaps can also hide malicious activities. These issues highlight the importance of robust security practices and a multi-layered security approach.

Multi-Signature and MPC

Multi-signature (multi-sig) wallets and multi-party computation (MPC) represent advanced security measures for digital asset custody. Both methods require multiple approvals before any transaction can occur, reducing the risk of unauthorized access.

MPC enhances digital asset security by splitting a private key into encrypted shares distributed among several parties. No single person ever holds the complete key. When a transaction needs approval, each party computes their part independently, so the full key never exists in one place. This distributed method makes it extremely difficult for attackers to gain access, as they must compromise multiple parties at once. Multi-signature wallets also improve security by requiring several people to approve each transaction, but each party holds a full key. Both methods support secure storage and are essential for safeguarding digital assets, especially for organizations managing large amounts of crypto.

Hardware Wallets and Key Management

Hardware wallets provide secure storage for private keys by keeping them isolated from internet-connected devices. These wallets protect against malware, phishing, and remote attacks. In 2025, institutional users are expected to hold nearly 69% of the hardware wallet market, showing strong adoption for robust security. Individual investors also turn to hardware wallets for personal control and peace of mind, especially in North America and Europe, where adoption rates are highest.

Best practices for key management include:

1. Implement a strong key management system to prevent unauthorized access.

2. Choose the right custody solutions for each need:

   • Hot wallets for real-time transactions.

   • Warm wallets with human approval for added security.

   • Cold wallet storage for long-term protection.

   • Frozen wallets accessed only through special key ceremonies.

3. Use advanced security measures such as MPC and hardware security modules (HSMs) to protect private keys.

4. Prefer institutional-grade custody solutions that offer regulatory clarity and extra security services.

Common mistakes in key management can lead to major losses. Storing encryption keys with encrypted data, using weak key generation, and failing to rotate keys regularly all increase risk. To avoid these errors, users should:

• Rotate keys on a regular schedule.

• Generate keys with approved, secure libraries.

• Enforce strong authentication and keep detailed audit logs.

Secure storage of backup phrases and regular updates to key management policies help maintain the integrity of digital asset custody.

Tiered Storage and Segmentation

Tiered storage divides crypto holdings across different custody solutions based on risk and usage. This strategy improves secure storage and reduces the impact of a single breach. For example, organizations can keep most funds in cold wallet storage for maximum security, while using hot or warm wallets for daily operations.

Segmentation also limits exposure. By spreading assets across multiple wallets and platforms, users can contain potential losses if one wallet becomes compromised. This approach forms the foundation of multi-layered security and supports best practices for securing digital assets.

Regularly review and update storage tiers as needs change. Always use secure storage methods for backup and recovery.

By following these best practices, individuals and institutions can strengthen digital asset security, reduce risk, and ensure the safe management of crypto holdings.

Securely Managing Assets

Access Controls and Permissions

Organizations must set clear user roles and permissions to protect crypto holdings. Role-based access control (RBAC) stands out as a leading method for managing digital asset permissions. This model assigns access rights based on job roles, ensuring only authorized users can view or move assets. RBAC helps prevent unauthorized use, theft, or accidental loss. As teams grow, managing permissions through roles supports collaboration and keeps asset integrity strong. Regular audits of permissions and access logs help maintain compliance and reveal any weaknesses.

• Assign roles for each team member.

• Limit access to only what each person needs.

• Review and update permissions often.

Auditing permissions regularly helps organizations spot and fix gaps before they become problems.

Cybersecurity Protocols

Strong cybersecurity protocols are essential for safeguarding digital assets. Leading security organizations recommend several best practices:

• Use strong, unique passwords for all crypto accounts.

• Enable multi-factor authentication to add another layer of protection.

• Store large amounts of crypto in hardware wallets, keeping them offline.

• Choose exchanges that use robust encryption and conduct regular security audits.

• Verify all communications to avoid phishing scams and use anti-phishing tools.

• Protect networks with firewalls, VPNs, and regular software updates.

• Follow frameworks like NIST or ISO 27001 for consistent security standards.

These steps help reduce the risk of cyberattacks and support securely managing assets in any environment.

Device and App Security

Device and app security play a major role in safeguarding assets. The most common vulnerability in digital asset thefts is compromised credentials, such as stolen usernames and passwords. Attackers use these to access internal systems, impersonate users, and bypass security controls. This can lead to data theft and loss of crypto. To lower these risks, users should separate financial apps from social or entertainment apps, avoid using public Wi-Fi for crypto transactions, and keep devices updated with the latest security patches.

Ongoing education and awareness programs also help users recognize threats like phishing and social engineering. These programs reduce human error, build a security-focused culture, and protect both individuals and organizations from costly mistakes.

Training employees and users to spot suspicious activity is one of the most effective ways to keep crypto safe.

Choosing Custody Providers

Selecting the right crypto custody provider requires careful evaluation of several factors. Providers must demonstrate bank-grade security, strong compliance, and a solid reputation. These criteria help protect digital assets and build trust with clients.

Security Standards

Bank-grade security forms the foundation of any reliable custody solution. Reputable providers hold certifications that prove their commitment to high standards.

• Gemini Custody, for example, holds SOC 1 Type 2 and SOC 2 Type 2 certifications.

• Most leading providers use cold storage, advanced encryption, and multi-signature setups.

• Regular third-party audits test security infrastructure and ensure that security measures meet industry expectations.

• Providers like io.finnet have their systems reviewed by firms such as Kudelski Security.

Bank-grade security also includes regular penetration testing, secure software development, and transparent incident response protocols. These steps help identify and fix vulnerabilities before they become threats.

Compliance and Regulation

Regulatory compliance is essential for any custody provider. Providers must follow all relevant regulations, including licensing, KYC/AML procedures, and asset segregation. Independent audits verify that providers handle data securely and meet regulatory standards.

• Third-party attestations, such as ISO/IEC 27001 and SOC 2 Type II, show adherence to best practices.

• Audit reports and logs offer proof of operational integrity.

• Providers like Fireblocks and BitGo maintain detailed audit trails and uptime guarantees.

Fully segregated accounts ensure that each client’s assets remain separate and protected. This structure supports transparency and helps meet regulatory requirements.

Insurance and Reputation

Insurance coverage gives clients peace of mind. Leading custody providers offer insurance that protects against external theft and insider collusion. This coverage acts as a financial safeguard, supplementing technical and operational controls. However, insurance often excludes losses from user error, phishing, blockchain failures, or market changes. Clients should review policy details to match their risk profiles.

A strong reputation signals reliability. Providers with a history of transparency, regular audits, and clear communication inspire confidence.

Choose providers who publish audit results and maintain open channels for client feedback.

Ongoing Best Practices

Regular Audits

Regular audits help organizations find weaknesses in their digital asset security. Internal audits check if teams follow security rules and use proper procedures. External audits bring in experts to review systems and spot hidden risks. These reviews often include testing access controls, checking transaction logs, and verifying backup processes. Audits also measure how well teams respond to incidents. By scheduling audits throughout the year, organizations can catch problems early and fix them before attackers take advantage.

Use both internal and external audits to get a complete view of your security posture.

Policy Updates

Updating governance policies and security protocols keeps digital assets safe from new threats. Teams should use strong access controls like multi-factor authentication and role-based access control. Continuous monitoring helps spot unusual activity quickly. Regular risk assessments allow teams to find and fix new vulnerabilities. Organizations must also stay compliant with regulations such as GDPR or PCI DSS to protect data and build trust.

Security teams should create and test incident response plans. These plans guide teams through detection, containment, and recovery steps during a security event. Training programs help employees recognize phishing and other cyber threats. Using frameworks like NIST or ISO 27001 gives teams a clear path for policy updates. Gathering feedback and measuring performance helps improve policies over time.

• Implement strong access controls and authentication.

• Monitor systems and update them regularly.

• Assess risks and update policies as threats change.

• Train employees to spot and report threats.

Regulatory Changes

Regulations change often in the crypto industry. Organizations must track new laws and standards to avoid penalties and keep assets secure. Teams should review updates from regulators and adjust their policies as needed. Regular training helps staff understand new requirements. By staying informed, organizations can adapt quickly and maintain compliance.

Following the latest regulations protects both the organization and its clients.

Securing digital assets requires a multi-step approach:

1. Use hardware wallets, multi-signature wallets, and cold storage for private keys.

2. Employ institutional-grade solutions like Multi-Party Computation and Hardware Security Modules.

3. Implement strong governance with regular audits and compliance checks.

4. Stay informed about changing regulations and choose insured, compliant custodians.

A layered security strategy reduces risk from ransomware and human error, while regular reviews help adapt to new threats. The regulatory landscape keeps evolving, so organizations must update policies and train teams to protect assets and maintain compliance.

FAQ

What is the safest way to store crypto assets?

Cold storage offers the highest level of security. Hardware wallets and air-gapped devices keep private keys offline. This method protects assets from online threats and hackers.

How often should users update their security policies?

Security experts recommend reviewing and updating policies at least twice a year. Regular updates help address new threats and keep digital assets protected.

Do all custody providers offer insurance for digital assets?

Not all providers offer insurance. Leading custodians provide coverage for theft and hacking. Users should always check policy details before choosing a provider.

Why is multi-signature important for crypto security?

Multi-signature wallets require approval from multiple parties before a transaction. This reduces the risk of unauthorized access and adds an extra layer of protection.

Can individuals use institutional-grade custody solutions?

Yes, some providers offer institutional-grade solutions to individuals. These services include advanced security features, regular audits, and strong compliance standards.