Over the past years, digital assets have become more and more known to the large public. What used to be an investment reserved to a few people has become a new Asset Class. And institutional investors need to get exposure to this new asset class, no matter if they think if it’s going up or down.

But when you are an institutional investor, you need someone to hold your assets on your behalf. That’s the role of custodians. Whatever asset an investor holds, he needs a regulated and trusted entity to insure his assets won’t be lost or stolen.

Those traditional custodians are seeing ana increase demand from their clients to service this new asset class of digital assets. Traditional custodians are looking at ways to position themselves on this new business and respond to their clients’ demand.

The issue is that holding digital assets is pretty different from holding traditional assets. Digital assets are controlled by a password known as a private key, and because it’s decentralised - if you lose the private key you lose the control over the assets.

This means that servicing assets creates new risks and challenges for custodians. In order to respond to their clients demand, they need to invest in new systems, and risk their reputation and a lot of money on new systems they do not even have a lot of history on. The sensitivity of the information they need to hold is so high that even regulation is still unclear regarding what security systems should be put in place.

The need to invest so much, risk their name and get expose to unknown regulation makes the strategic decision to engage in this new business too complex and risky.

While major institutions like Fidelity and ICE are developing their own in-house solution to enter the market, most of traditional custodians are still monitoring the market without taking any strategic decision.