Choosing a Cryptocurrency Custodian

Now that you have decided to invest in Bitcoin or other cryptocurrencies, the question is how to do so. One of the primary considerations when investing in this asset class is choosing a custodian.

What Are Crypto Custodian Services?

Custodial services, whether for Bitcoin, Ethereum, Ripple or other cryptocurrencies, utilize a third-party company to provide storage and security. Custodial accounts are nothing new in the investment world. Self-directed IRA accounts that hold alternative assets such as real estate or metals, for example, are managed by third-party custodians. These custodians are often banks, trust companies or other regulated financial institutions. In addition to the safe storage and protection of assets, these custodians also provide regular accounting, inventory and other services for the account holder.

As Bitcoin and other cryptocurrencies gain in popularity, an increasing number of investors, especially larger investors, will want to ensure that their cryptocurrency investment is safe and accounted for. Because of this, the number of crypto custodians could increase significantly in the months and years ahead.

What to Look for in a Custodian?

  • Offerings: What does a particular custodian bring to the table? Compare different custodians and the services they offer. The ideal custodian may offer not only storage and security of the digital assets but should also offer regular accounting and account statements.
  • Time in Business: The cryptocurrency craze is fairly new, and thus, many custodians may not have been in business for long. Some traditional asset custodians may, however, offer custodial services. Many of these companies have been in business a very long time and have a track record of reliability.
  • Cost: Of course, cost is also an important factor that must be considered. Fees can vary greatly from custodian to custodian and can have a significant impact on overall portfolio performance. The best deal is not always the cheapest, however, and you will want to make sure you are comparing the same level of services when comparing companies.
  • Security: Needless to say, security is extremely important in the world of digital currency. Without getting overly technical here, it is also important to gain an understanding of the security protocols in place and to also understand the potential risks that come with buying and/or selling of cryptocurrencies.

As investor interest and participation in cryptocurrencies increases in the years ahead, there will be more options available to investors for the storage and security of their digital currency portfolios. In the meantime, some options do exist. As with any other investment or custody situation, it is imperative for investors to do the necessary homework and due diligence before deciding on a custodian.

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