Sarah Morton is Chief Strategy Officer and Co-founder of MeetAmi Innovations Inc.
Custody of digital assets is evolving, whether it be the technology itself, the plethora of new tokenized investment products, or the risks of leaving assets with service providers like centralized exchanges, whether real or perceived., breaks down the evolutions in digital asset custody, focusing on the shift of wealth to self-custody in the space and how advisors must support this shift.Web3 rails will eventually swallow traditional finance, and there’s no question about it.
These firms are slowly cloning traditional securities like money market funds and mutual funds for on-chain consumption and seamless peer-to-peer transfers, and it’s only a matter of time before regulators catch up with the market to allow the exchange of traditional securities, such as Fortune 500 stocks or exchange-traded funds , in the same exact manner. Eventually every type of traditional asset will also be an on-chain asset. All we need is time.
As advisors and fiduciaries, it behooves us to be prepared for the day that clients come to us asking to support self-custody solutions. There are many options out there for intrepid self-custodians, from multi-sig accounts to account abstraction smart contract wallets, from institutional hardware to multi-party computation wallets, but each entails their own security and usability tradeoffs, as well as cost considerations.
Whatever you choose as an advisor, it’s important to keep in mind the Custody rule and be certain that you don’t have arbitrary withdrawal privileges on your clients’ accounts. There hasn’t been a lot of guidance for some of these account structures, and there still remains some clarity to be had around the extent to which any particular multisig, AA, or MPC protocol qualifies as substantial control over client funds.
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