Rise of crypto custody: How digital assets can be stored securely

By 2030, tokenised assets could account for about 10 per cent of the world's gross domestic product (GDP).

By 2030, tokenised assets could comprise about 10 per cent of the world’s gross domestic product (GDP).

This projection is part of a 2022 report by Boston Consulting Group and private markets platform ADDX, which together estimate that asset tokenisation could present a US$16 trillion (S$20.9 trillion) business opportunity by then.

It is a future that is beginning to materialise in today’s financial landscape. “There is a rapidly growing institutional interest in digital assets,” said Fiona Murray, Asia-Pacific managing director of US-based crypto firm Ripple.

She noted that traditional financial assets like stocks, bonds, and real estate are also increasingly being tokenised. Tokenisation refers to the process of digitally representing an asset on the blockchain.

As digital assets gain greater traction among institutions, a key question arises: How can these assets be stored securely?

Enter: Crypto custody services.

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Rise of crypto custody

As the name suggests, crypto custodians safeguard digital assets. They do this by securing private keys – alphanumeric codes needed for access and to authorise transactions.

They can also handle payments and liquidity services, and ensure regulatory compliance.

As more financial institutions enter this space, Murray anticipates “a growing demand for secure and compliant custody solutions to effectively manage digital assets for their clients”.

It is an opportunity that Ripple is looking to seize. Ripple provides enterprise solutions that leverage the cryptocurrency XRP, the native token of the decentralised blockchain XRP Ledger. It acquired Swiss digital asset firm Metaco in May 2023 as part of its move into the crypto custody space.

Ripple’s Singapore subsidiary also secured its major payment institution licence for digital payment tokens from the Monetary Authority of Singapore last year.

“Ripple Custody is designed to safeguard a wide array of digital assets,” said Murray, “ranging from stablecoins and cryptocurrencies to tokenised real-world assets such as stocks, bonds, commodities, and real estate.”

Institutions can also tokenise assets on the XRP Ledger through Ripple Custody. Murray believes this “not only simplifies the integration of digital assets into existing financial systems, but also fosters greater confidence among institutions looking to navigate the evolving digital asset landscape”.

The company has partnered financial institutions, including BBVA Switzerland, to enhance their digital asset service offerings.

Ensuring security, compliance

Despite growing interest, adoption barriers persist. Murray highlighted the “lingering uncertainty surrounding regulatory frameworks” as a key issue.

“While regulatory clarity is improving in certain regions, many financial institutions remain cautious,” she said, “wary of potential future regulations that could affect their operations.”

Security concerns also loom large. “Many institutions are apprehensive about the risks associated with managing digital assets,” she added.

Ripple Custody addresses these barriers through features like transaction screening services, hardware security modules, and pre-configured policy frameworks.

These features are designed “to meet the stringent requirements of financial institutions, ensuring that digital assets are managed safely and in accordance with regulatory standards”, said Murray.

Ripple has been supporting custody operations in 20 regulatory jurisdictions since 2023. It also facilitates payments in 80 markets worldwide, enabling compliant cross-border operations.

This was produced in partnership with the Monetary Authority of Singapore and the Global Finance & Technology Network.

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