Do We Actually Need a Custodian? What We Worked Out.

We spent a week reading about custody and got nowhere, because we were comparing technology. Three practical questions settled it in an afternoon. It got clearer once I had a business wallet with institutional controls open next to what I was being offered.

Question one: can we staff it?

Running our own multi-signature arrangement means three or more people holding keys, in different places, with backups.

It means a recovery procedure rehearsed annually with real signatures, not written and filed.

It means a plan for someone leaving, being ill, or being unreachable.

And it means documentation good enough that it survives the departure of whoever set it up.

We are four people, two of whom would be key holders, and one of those is the only person who understands how it works. That answered it.

Question two: how much is it?

Below a certain amount, the overhead of running a disciplined key management operation exceeds the benefit.

Above a certain amount, a single custodian’s insurance limit stops being meaningful and splitting starts to make sense.

We were between those points, which pointed at a provider for the operating balance and something simpler for the rest.

Question three: whose money is it?

Ours. Not clients’.

If we held client funds, the rules would largely decide this for us, and they would point at a regulated custodian.

That question eliminates a lot of debate for anyone it applies to.

What we decided

Working balance with a regulated provider, where it can move quickly and where the controls are enforced in software rather than by our discipline. On the receiving side the equivalent is a platform set up for client account handling, with settlement included.

Reserve in a multi-signature arrangement we can operate, sized so that the coordination burden is rare.

The diligence we did on the provider

Checked the licence on the regulator’s own register, confirming the entity name matched the contract and the permission covered custody rather than just exchange.

Asked how client assets are segregated and who provides independent assurance over it, and read the report.

Asked what happens to our assets if they become insolvent, and got an answer citing a specific provision.

That took an afternoon and it is the part that actually matters.

What I would tell someone in the same position

Do not decide this on principle. Decide it on who you have and what they will reliably do every quarter for the next few years. The thing I did not think about until it mattered was whether a crypto exchange with published fees exists. It is worth checking early.

The most secure arrangement your company will not maintain is less secure than a simpler one it will.