A joint report from Aspen Digital and PwC titled “State of Digital Asset Custody: Understanding and Implementing Digital Asset Custody for Institutional Investors” reveals a growing demand for institutional-grade digital asset custody solutions among family offices, individuals high net worth (HNWI). ), and external asset managers (EAMs) in Asia.

The report highlights that digital assets, now a $1.2 trillion market, have become an alternative asset class over the past decade, with more than 120 custody providers as of April 2023. While the While self-custody solutions offer full access and control over digital assets, many institutions are recognizing their limitations for ongoing business and operational needs, leading to a preference for third-party custodial service providers.

According to PwC’s 2022 Metaverse Survey, 82% of executives expect to integrate Metaverse into their business activities within three years. However, the report indicates that most NFT custody services offering self-custody solutions can present a challenge for institutions new to the industry.

Digital asset custodians have expanded their role from simply safeguarding cryptocurrencies to helping investors navigate and participate in new business opportunities and asset classes, such as Decentralized Finance (DeFi), non-fungible tokens (NFTs), and the metaverse. The report predicts an increase in third-party custodians around the world enhancing their technical capabilities and service offerings.

Duncan Fitzgerald, PwC Co-Lead of Digital Assets and Web3, emphasized the importance of safeguarding assets in the digital environment. Elliot Andrews, CEO of Aspen Digital, said that understanding the unique features of custody solutions and providers compared to traditional assets is one of the biggest impediments when considering investment.

Despite the growing need for institutional-grade digital asset custody, there are concerns among family offices and HNWIs about adopting custody solutions, particularly as it relates to asset security, navigating fragmented regulations between jurisdictions and provide comprehensive insurance coverage.

The report’s findings are based on feedback from Asian-based family offices, HNWIs, and EAMs in Q2 2023. In-depth follow-up interviews were also conducted to gain additional perspectives on custodian adoption.

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