It is obvious that many crypto traders don’t know the variety of options they have regarding the ownership of crypto assets. They don’t even know the various custody methods, advantages, and costs involved.
Although so many assets can be possessed indirectly, investors have the opportunity of gaining direct ownership of their cryptocurrencies. It distinguishes them from other asset classes like stocks.
This type of crypto custody method is used in a situation where a third party gains access to assets on behalf of an investor. In other words, the third party is entrusted with the client’s assets.
Although so many financial organizations have been in the business of delivering custodial services for years, the case is not the same in cryptocurrencies. Any cryptocurrency investor who is willing to partake in indirect ownership can readily hold their assets on exchanges like Coinbase.
There are lots of crypto custody solutions offered by financial organizations, but they are all favoring organizational investors rather than individual traders.
Even Fidelity Investments announced Digital Assets in October 2018, and still went ahead to write in a Medium post: “We imagine a world, soon, where all types of assets are issued natively on a blockchain or represented in tokenized format.”
They also went on to say:
“Addressing custody issues for institutional investors is one critical step in order for these markets to continue to develop. By building native expertise in these technologies we hope to be well-positioned to serve the needs of our clients for the long term.”
Coinbase Custody also made an announcement about its authorization to act as an independent Qualified Custodian. This was briefly after Fidelity Digital Assets made its announcement.
However, traders should know that indirect ownership isn’t free. It has its disadvantages and advantages. Whenever an investor holds digital assets on an exchange, it is the responsibility of the marketplace to handle the administration. Exchanges hold huge amounts of cryptocurrency, which draws the attention of hackers.
Take a look at 2018, when gullible individuals stole more than US$900 million worth of cryptocurrency from these marketplaces. This information was according to figures presented by Ciphertrace’s Cryptocurrency Anti-Money Laundering Report
As the name implies, this is a type of ownership in which a trader is in charge of his digital currencies. Here, the trader is a personal custodian of his assets. As earlier said, the investors have personal control over their own cryptocurrency, which makes it different from other asset groups. The only way crypto traders can be directly in charge of their digitals assets is by making use of crypto wallets, which of course differs.
Also, the good thing about this type of ownership is that it gives investors full control, even though they get to bear all responsibilities that comes with it. There are different types of crypto wallets out there, the only way investors can handle this is by doing proper research before concluding on any choice.
For those who will choose to have direct custody of their assets, there has to be a major tip to achieve your task. Always have it in mind that this choice is accompanied with lots of responsibilities, especially when there is a case of lost asset. Indirect custody or ownership is the exact opposite. The third party bears the responsibilities and gives account of everything. This may sound like less work but it draws the interest of hackers.