As inflation concerns persist and negative interest rates loom, even the most conservative institutional investors—such as corporate treasurers—are exploring digital assets for surplus cash allocation. According to Gartner, 5% of CFOs and senior finance executives planned to include Bitcoin on their balance sheets by 2021. However, the existing digital asset infrastructure often falls short in delivering the security, liquidity, and financial tooling required for enterprise-grade operations.
Most custody technologies struggle to ensure both fund safety and operational efficiency, let alone support automation, liquidity management, or regulatory reporting. As a result, corporate treasurers frequently rely on a patchwork of tools to manage crypto holdings. A combination of hot and cold wallets may be used, but this introduces significant operational risks and makes financial reporting cumbersome—often requiring hours of manual data reconciliation across disparate sources.
To address these challenges, institutional cryptocurrency custody is typically structured in one of three models: self-custody, co-custody, and third-party custody. Each approach offers distinct trade-offs in security, control, compliance, and operational efficiency.
Self-Custody: Full Control Over Digital Assets
Self-custody aligns with Satoshi Nakamoto’s vision of financial sovereignty—holding your own keys means holding your own assets. This model gives institutions complete control over their private keys, akin to storing gold in a private vault.
Single-Signature Wallets
Small businesses may use single-signature hardware wallets to self-custody. The private key is stored on a secure device (e.g., a USB drive), which can be connected to a desktop or mobile device to sign transactions.
Pros:
- Full control over assets
- Fast transaction execution by authorized personnel (e.g., CEO or CFO)
Cons:
- Not scalable for larger organizations
- Single point of failure: if the key holder dies, leaves, or is compromised, funds may be lost
- No accountability when multiple staff share access
- High risk of insider theft or cyberattacks
👉 Discover how modern custody solutions eliminate single points of failure.
Multi-Signature (Multi-Sig) Wallets
To mitigate risks associated with single-signature setups, most enterprises adopt multi-signature wallets. These require M-of-N private keys to authorize a transaction—e.g., 2 out of 3 or 4 out of 5 signatures.
Pros:
- Enables role-based permissions and multi-step approvals
- Distributes control across team members
- Reduces risk of unilateral misuse
Cons:
- Slower transaction processing due to approval bottlenecks
- On-chain execution leads to network fees and delays during congestion
- Limited scalability (typically capped at 15 signers)
- Changes in custody policy require fund migration to a new wallet
- Public blockchain visibility may expose signature patterns to attackers
Co-Custody: Shared Control with External Parties
Co-custody involves sharing control of assets with an external co-signer—either as a backup or active participant. This model can be implemented via on-chain multi-sig or off-chain threshold signature schemes (TSS) using multi-party computation (MPC).
On-Chain Multi-Sig Co-Custody
In this setup, a company holds two out of three private keys, while a third is held by a trusted service provider.
Pros:
- Reduces single-point failure risk
- Distributes key management responsibility
Cons:
- Inherits all limitations of traditional multi-sig
- Introduces reliance on a trusted third party—a potential security vulnerability
Off-Chain MPC-TSS Co-Custody
MPC with Threshold Signature Schemes (TSS) moves the signing process off-chain. Instead of multiple signatures on the blockchain, a single cryptographic signature is generated collaboratively by distributed nodes, each holding a fragment of the private key.
Pros:
- Faster transaction signing (not dependent on blockchain speed)
- No network fees for signature generation
- Cross-chain compatibility via standardized ECDSA algorithm (supports ~95% of blockchains)
- Enhanced privacy—signing workflows aren’t exposed on public ledgers
Cons:
- Centralized MPC implementations are vulnerable to data leaks (e.g., Intel SGX breaches)
- If all MPC nodes are controlled by one entity, insider threats remain (as seen in the QuadrigaCX collapse)
- Approval logic runs on opaque software layers, undermining trustless security
- Limited support for immutable audit trails
👉 Learn how decentralized MPC networks enhance institutional security.
Third-Party Custody: Entrusting Assets to a Trusted Entity
This model resembles depositing gold with an insured vault service. Institutions transfer control of assets to a custodian—often using multi-sig wallets managed entirely by the provider.
Pros:
- No technical expertise required from the client
- Simplified onboarding and management
Cons:
- Loss of direct control—custodians can freeze or restrict access
- Assets may be pooled in shared accounts, reducing transparency and auditability
- Risk of insolvency or hacking (e.g., past failures like New York Mellon’s crypto custody arm)
- High fees that compound over time
- Slow and costly deposits/withdrawals with multi-day processing windows
Qredo Network: Decentralized Custody for Decentralized Assets
Qredo introduces a paradigm shift—decentralized custody for decentralized assets—using MPC technology across a distributed blockchain network. This enables institutions to combine self-, co-, and third-party custody models without sacrificing security or accessibility.
Key Features:
Instant Transactions
Qredo supports real-time asset coordination across custodians, brokers, and financial institutions—critical in volatile crypto markets.
Unified Dashboard
Manage all digital assets—from corporate wallets to regional subsidiaries—through a single interface with real-time balance and transaction visibility.
Fiat-Treasury Integration
Open-source architecture allows direct API integration with existing financial management systems, bridging crypto and traditional finance.
Flexible Approval Workflows
Customizable M-of-N signing policies support unlimited signers and dynamic delegation of transaction initiation, approval, and reporting roles.
Immutable Audit Logs
All transactions are recorded on Layer 2 blockchain, creating tamper-proof records for compliance and internal audits.
Regulatory Readiness
Built-in messaging enables attachment of sender/receiver identities, facilitating compliance with emerging regulations like the Travel Rule.
Seven-Layer Security Framework
Qredo’s unique defense-in-depth model protects against hacking and collusion. Its MPC network runs on hardened hardware and is insured by Lloyd’s of London.
Frequently Asked Questions
Q: What is the safest way for institutions to store cryptocurrency?
A: A decentralized MPC-based custody solution with multi-layered security, such as Qredo, offers superior protection compared to single-signature wallets or centralized custodians.
Q: Can I maintain control while using a third-party custody service?
A: Yes—through co-custody models using MPC-TSS, where private keys are split between you and the provider, ensuring no single party has full control.
Q: How does MPC improve upon traditional multi-signature wallets?
A: MPC generates a single signature off-chain, eliminating blockchain congestion delays, reducing fees, enhancing privacy, and enabling cross-chain compatibility.
Q: Is self-custody practical for large enterprises?
A: Only with advanced tools like customizable MPC wallets that support scalable approval hierarchies and integration with treasury systems.
Q: How do institutional custody solutions support compliance?
A: Through immutable audit logs, identity-attached transactions, and API-based reporting that align with frameworks like the Travel Rule.
👉 Explore enterprise-grade custody solutions built for security and scalability.
The future of institutional crypto adoption hinges on robust, flexible, and compliant custody infrastructure. As digital assets become integral to corporate treasuries, choosing the right custody model—balancing control, security, and efficiency—is more critical than ever.