What do you see as the biggest operational challenges in delivering secure, large-scale digital-asset custody today?
The biggest operational challenges today go far beyond safeguarding private keys. The real complexity lies in managing and connecting to the fragmented, non-standardised infrastructure that underpins the digital-asset ecosystem.
No two custodians, exchanges, or OTC brokers operate the same workflows or technology stack, making it difficult to build the real-time, automated integrations that institutions expect. This creates operational ambiguity around asset movement across the digital asset ecosystem, segregation of duties and connectivity to third-party systems, all areas where the risk is greater than securing the private keys.
At the same time, institutions face multi-chain complexity, increasing vendor dependencies, and the need for real-time compliance that matches the speed of blockchain settlement.
The timing mismatch between instant onchain settlement and batch-based fiat operational processes or systems introduces funding and timing risk, trapping liquidity and reducing capital efficiency.
Ultimately, the core challenge is integrating an operational function into a 24/7 digital-asset environment with legacy financial infrastructure in a way that is secure, scalable and resilient.
How are institutional expectations for crypto custody evolving, and where is the market still falling short?
Over the past few years, there has been a much better understanding of private key management across the market and the regulated digital asset custodians and wallet tech providers are now relatively battle tested, although major institutions are still treating this as ‘new tech’. Firms now expect custodians to provide the same level of governance, transparency, and operational rigour as a global custodian bank would for traditional assets. This includes segregated custody away from trading, real-time reporting, strong operational controls, and legally robust frameworks around asset ownership and management.
However, the post-trade market is still fragmented. A lack of standardised interoperability slows the ability to deploy capital efficiently and makes it extremely difficult to manage operationally. Institutions increasingly expect seamless, multi-venue trading with segregated and instant collateral management capabilities — yet, achieving this remains a work in progress.
Off-exchange collateral is often highlighted as a key driver for institutional crypto growth. What makes it so important, and what barriers remain to wider adoption?
Off-exchange collateral addresses one of the core challenges for institutions — counterparty risk. The crypto market often operates on a prefunded basis at exchanges or brokers, which means institutions take on exchange risks to facilitate trading.
Just like in the traditional finance post-trade world, firms want to hold their assets with a trusted, regulated custodian while still accessing liquidity and leverage on trading venues. This reduces counterparty risk and allows capital to be deployed more efficiently without prefunding positions on an exchange.
However, adoption is still constrained by structural and operational factors. Many existing models are not genuinely real-time, meaning collateral checks often involve delays or manual interventions. Legal clarity is another limiting factor, as institutions need absolute certainty about how collateral can be pledged or liquidated in a default scenario. Moreover, some solutions inadvertently transfer risk to intermediaries that are less regulated, which undermines the purpose of off-exchange collateral. True adoption requires fully automated, legally sound integrations between custodians and trading platforms.
How do you view the role of custodians in supporting off-exchange collateral models — particularly around transparency, risk management, and settlement?
Custodians are central to the off-exchange collateral model, acting as independent, trusted entities that ensure assets are securely held and transparently managed.
Their role is to provide verifiable proof that collateral is available and unencumbered, allowing exchanges to rely on it in the event of a default without requiring assets to move onto the venue.
Achieving this requires robust reporting, real-time settlement messaging, and clear legal structures that define how collateral is segregated, pledged and liquidated. In this way, custodians effectively serve as the trust layer of the market, enabling institutions and exchanges to interact with confidence.
As institutional participation grows, this role becomes even more critical, mirroring the function of custodians, clearing houses and prime brokers in traditional capital markets.
There is growing pressure for more standardisation in crypto custody. Which areas most urgently need common standards, and what would that unlock for the industry?
Firstly, the industry fragmented regulation globally, as it relates to crypto custody, with differing requirements across different regulators leading to high licensing requirements, costs and operational risk controls depending on those regulatory requirements.
There needs to be common standards across areas such as key management, segregation of client assets, bankruptcy remoteness, operational and market infrastructure workflows, and legal frameworks to scale globally. Standardised APIs and messaging protocols would enable plug-and-play connectivity between custodians, trading venues and settlement networks, creating interoperable infrastructure rather than isolated silos. Legal frameworks around collateral, segregation and asset encumbrance are equally important, as they would provide institutions with the clarity they need to deploy off-exchange collateral confidently across multiple custodians and venues. Together, these standards would unlock real collateral mobility, deepen liquidity, reduce counterparty risk and enable capital efficiency at a scale comparable to traditional financial markets.
How should custody models adapt as digital assets expand beyond tokens into tokenised RWAs, stablecoins, and programmable money?
Custody must evolve from a passive safekeeping function into a real-time, programmable infrastructure layer. Tokenised assets and programmable money require continuous reconciliation, atomic settlement and near-instant verification of asset availability. Custodians must also be able to govern smart-contract-based workflows, such as conditional transfers, expiry mechanics, or automated distribution of rights, with the same rigour applied to corporate actions in traditional markets.
Additionally, the model needs to support a variety of asset classes and liquidity workflows, including cash tokens, stablecoins, tokenised funds, and digital securities, while integrating with existing treasury, post-trade, and risk systems. In essence, custody is becoming dynamic, interoperable, and deeply integrated, enabling institutions to operate efficiently across both traditional and digital financial markets.
How do regulatory developments in the UK, EU, and US influence how custodians build infrastructure and services?
We are now seeing a global shift from inaction to the creation of frameworks, which is critical for market maturity. Institutional participation hinges on having clear, consistent and well-defined rules that establish a secure and reliable environment. With regulatory developments such as Markets in Crypto-Assets Regulation (MiCA) in Europe, and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act in the US, institutions finally have more clarity on capital treatment, segregation of client assets and compliance expectations. It is a challenge for crypto custodians to be regulated globally as that comes with siloed build requirements relating back to each individual regulatory licence.
Looking ahead, what do you think will be the biggest drivers shaping digital-asset custody over the next few years?
Digital asset custody is set to evolve from a specialised service currently thought of as ‘new tech’ into core financial market infrastructure. A major catalyst will be the growing need for post-trade infrastructure to reduce counterparty risk that currently exists in the vertically integrated trading and custody models that exist today in crypto: institutions will expect assets held in custody to be deployable across multiple venues in real time, without the friction of prefunding or unnecessary counterparty risk. Interoperability will also become critical, with real-time APIs and automated settlement workflows enabling seamless connectivity between custodians, trading venues and risk systems.
At the same time, regulatory convergence and rising bank-grade expectations will continue to shape the landscape. We are likely to see more traditional bank global custodians entering the space alongside the ‘new tech’ regulated crypto custodians that exist today. A mix of multi-custodian models will become standard practice as firms scale digital asset business lines and this triggers the need to strengthen their operational resilience and options for custody.
Finally, the rapid growth of tokenised real-world assets, programmable money, and stablecoins will accelerate this shift, transforming custody into a dynamic, programmable and deeply integrated layer of global capital markets.
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Deutsche Bank
Jie Yi (Jaelynn) Lee
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Image: LMAX Group 
