How to assess security in crypto custody services?

How to assess security in crypto custody services?


The crypto ecosystem, with its ups and downs and the constant appearance of new “altcoins”, is calling on users of cryptocurrencies to pay ever-more attention to transparency, security, and liquidity.

The crypto universe is gaining ground among investors. The main attractions include its growth potential, access to global markets, decentralisation, and early investment opportunities. This reality of searching for new investment opportunities is also fed by the appearance of new altcoins that are coming out all the time. But before investing in a new project, it is essential to research and compile all possible information: transparency, liquidity, and security are some of the main aspects to keep in mind.

Restoring investor confidence

The truth of the matter is that, especially after the bankruptcy of the FTX exchange and after the increase in withdrawals and the subsequent price plunge by FTT (the platform’s native token), transparency is the key element for restoring the confidence of investors, who must have access to financial information about the transactions and activities carried out by an exchange. If the documentation of a project seems to be insufficient or provides scarce information, it’s better to let the project go.

The widespread concern about the solvency of exchanges has led to the implementation of new systems for verifying assets and liabilities, with the aim of bringing peace of mind to investors and customers alike. Binance Holdings Ltd. and, for example, hired external auditors to provide “proof of reserves” reports, an increasingly popular type of certification to show that firms are solvent.

The objective of the process is to provide investors with the guarantee that a firm’s tokens are backed by liquidity reserves and that their funds are secure. Finally, all the players involved in the cryptocurrency ecosystem should commit to a path that leads to regulatory harmonisation in order to guarantee transparency and provide consumers with the best possible protection.

Every day, more and more institutional investors are joining the blockchain ecosystem, which requires greater convergence between the traditional financial system and the new digital economy that is sprouting. In this regard, ensuring all guarantees in terms of security and counterparty risks is fundamental to the custody service of BBVA in Switzerland.

Proliferation of cryptocurrency projects

New cryptocurrencies are born and die every day. According to the platform, Coinopsy, there are over 2,400 dead crypto currencies. The reasons why they no longer work include abandonment, being used as a prank or fraudulently, and a number of other incidents or irregularities related to the Internet, wallets, updates, or volume. 

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