According to its recent report titled “The Importance of Custodians in Bitcoin Adoption and Ownership,” custodians play a crucial role in safeguarding Bitcoin
Global accounting firm KPMG has highlighted the critical role of strong custodial practices in boosting Bitcoin (BTC) adoption among institutions and businesses.
In its recent report titled “The Importance of Custodians in Bitcoin Adoption and Ownership,” KPMG outlined the crucial function of custodians in safeguarding Bitcoin holdings and facilitating the industry's growth.
According to the report, custodians must ensure they have solid frameworks in place to deal with any emerging threat, as security is of the utmost importance in driving adoption.
Highlighting the decentralized nature of Bitcoin, which allows users to control their assets, the report noted the challenges many face in managing cryptographic keys.
“Custodians reduce the complexity and risk of managing bitcoin holdings, making it easier for new investors,” the report stated.
The firm further stressed the need for custodians to improve security frameworks and regulatory compliance to protect against internal and external threats.
KPMG identified six critical attack vectors custodians needed to address, including threats from hackers, internal fraud, and operational failures. It added that collapses like Mt. Gox and FTX resulted from weaknesses in custodial oversight, leading to billions of dollars in losses.
The report also highlighted the growing importance of custodians in supporting the rise of Bitcoin exchange-traded funds (ETFs). Bitcoin ETFs, which accumulated over $59 billion in assets under management, relied on custodians to hold underlying assets securely.
Finally, KPMG called for custodians to adopt transparent practices, such as proof-of-reserves reports and stronger operational reliability, to build trust in the system.
It stressed the importance of regulatory compliance, particularly adherence to anti-money laundering laws and oversight from agencies like the SEC and FinCEN.
The report warned that custodians must stay ahead of emerging threats, including those posed by artificial intelligence, and adapt to new challenges in the evolving Bitcoin landscape, such as Layer-2 solutions and collaborative custody models.
KPMG’s recommendations urged custodians to prioritize security, compliance, and transparency to build investor confidence and protect the integrity of the expanding digital asset market.
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