What Wall Street Still Gets Wrong About Crypto Custody

Why are some of the world’s most sophisticated financial institutions still misreading the single most important pillar of digital-asset adoption: custody?

It’s an uncomfortable question — and a necessary one — because custody is no longer a technical niche for crypto natives. It is becoming the regulatory, operational, and fiduciary infrastructure layer upon which the next decade of tokenized markets, digital dollars, and institutional blockchain strategies will be built.

Across trading floors, risk committees, and wealth management platforms, decision-makers are realizing that their assumptions about custody were built on consumer-grade mental models: cold wallets, hardware devices, exchange accounts, or “crypto as a separate silo.”

In other words — models that do not scale to institutional money, institutional controls, or institutional accountability.

Today’s custody landscape is shifting faster than many realize. New entrants. New regulatory expectations. New attack surfaces. New settlement models. New insurance structures. New capital rules. And new fiduciary realities for wealth managers who must answer a simple but existential question:

“Are these digital assets truly protected — and who is actually on the hook if they’re not

This article answers that question through an institutional lens, backed by market structure analysis, regulatory frameworks, and the operational requirements of the world’s largest financial firms.

The Scene: A Risk Committee That Isn’t Asking the Right Question

Picture this.

A glass-walled conference room 42 floors above Manhattan. It’s 7:12 a.m., and a global bank’s Digital Asset Steering Committee is convening ahead of the trading day. The chief risk officer reviews an onboarding proposal for a new blockchain-based liquidity product. The conversation quickly drifts, as it often does, to custody.

“Are we using cold wallets or multi-sig?”

“Do we require client-side signing?”

“Is this similar to Coinbase Custody?”

“Can the private keys be hacked?”

“Do we have enough insurance coverage?”

The questions are reasonable — but they’re also premature.

Because the real question isn’t how assets are stored.

It’s what the institution’s regulatory obligations actually require — and whether the custody model supports the firm’s existing:

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