In the dynamic world of cryptocurrency, the roles of fiat and Bitcoin custodians are pivotal in bridging traditional finance with digital assets. While fiat custodians are typically licensed banks, Bitcoin custodians often operate outside this framework, with exceptions like AMINA, which serves as both. This article explores the landscape of top custodians, highlighting their inception, domicile, and unique offerings.
It also delves into the insurance policies provided by traditional insurers like Aon and Lloyd’s of London, which have ventured into the crypto space. Additionally, the article examines the growing trend of self-custody, driven by security concerns and the collapse of centralized service providers.
Fiat custodians typically hold traditional currencies and may offer services for converting fiat to crypto and vice versa. The main difference between Bitcoin custodians and fiat custodians is that fiat custodians are licensed banks, whereas most Bitcoin custodians are not licensed banks. A notable exception to this is AMINA, which is both a Bitcoin custodian and a licensed bank.
Top Bitcoin Fiat Custodians for Institutional Investors
| # | Custodian | Inception Date | Domicile |
| 1 | BNY Mellon The Bank of New York Mellon Corporation has signaled interest in acting as a fiat custodian in the crypto space. | 2007 | USA |
| 2 | State Street Another major traditional financial entity that’s shown interest in the crypto realm. | 1792 | USA |
| 3 | Fidelity Digital Assets A trusted financial institution with dedicated Bitcoin custody and execution services. | 2018 | USA |
| 4 | BitGo A pioneer in institutional crypto custody, known for advanced security features for Bitcoin. | 2013 | USA |
| 5 | JP Morgan Chase One of the largest global financial institutions provides crypto-friendly banking services to exchanges and digital asset firms such as Gemini. | 1871 | US & UK |
Banks that Work with Bitcoin and Bitcoin Businesses
Typically, major custodians (like Coinbase Custody, Fidelity Digital Assets, and BitGo) offer some form of insurance coverage for their clients’ Bitcoin holdings. For example, BitGo maintains a $250M insurance policy on digital assets whereas BitGo Trust Company maintains all of the keys. Specifically, the policy covers copying and theft of private keys, insider theft or dishonest acts by BitGo employees or executives, and a loss of keys. Traditional insurers such as Aon and Lloyd’s of London have ventured into the crypto space, providing policies for crypto custodians and other businesses.
| # | Custodian | Inception Date | Domicile |
| 1 | Aon Offering a crime policy to protect against the loss, damage, destruction or theft of digital assets in secure premises or in transit or transmission and also internal and external fraud, including electronic theft, which would include hot wallet protection. | 1982 | USA |
| 2 | Lloyd’s of London Insuring the largest custodians in the Bitcoin space for years including BitGo and Crypto.com. | 1688 | UK |
| 3 | Munich Re Protects against theft and permanent loss of digital assets. Provides insurance for the cryptocurrency staking service offered by Boerse Stuttgart Digital, the crypto-focused arm of the Stuttgart Stock Exchange | 1880 | Germany |
Source: Cointelegraph Research, CryptoResearch.Report
Since 2020, a noticeable downward trend can be seen in the exchange balance of Bitcoin, indicating that Bitcoin owners remove their Bitcoin from the exchange after making a purchase instead of leaving their Bitcoin in the exchange. The amount of Bitcoin on exchanges is currently at a 5-year low.
BTC Flows Off Exchanges Suggest Self-custody Trend
Besides black-hat hacking, 2022 was also riddled with collapses and bankruptcies of centralized service providers, including Celsius and FTX. These events highlighted that funds are not safe unless they are in self-custody. In response, more and more users are purchasing hardware wallets. After FTX went down, wallet manufacturer Trezor posted a 300% growth in revenue figures and sold more devices than at the height of the bull market. This trend is set to continue and market researchers project that the market for hardware wallets will grow from $285M to over $1.4B by 2030.
The convergence of traditional finance and digital assets is reshaping the custodial landscape. As explored, both fiat and Bitcoin custodians play critical roles in ensuring the secure transition and storage of digital currencies. With institutions like BNY Mellon and JP Morgan Chase showing interest in crypto, and insurers expanding into crypto coverage, the integration of these two worlds is set to deepen.
However, recent trends indicate a shift towards self-custody, spurred by financial uncertainties and the rise of hardware wallets. As the market evolves, the focus on robust security measures and diversified custody solutions will be paramount for safeguarding assets in this ever-changing environment.
