Custody

In financial circles, custody refers to the holding of assets on behalf of a client, generally by some form of institution. The use of a custodial service can be desirable to an asset holder, as it mitigates security risks like theft or loss.

Custodians tend to differ from banks as they’re unable to leverage the assets they hold to their own ends. For their troubles, the institution will generally impose a fee for the safekeeping of the assets. This may also cover their sale at the client’s behest.

This isn’t to undermine the importance of these entities. Custodians play a vital role in the ecosystem, from onboarding newcomers to providing veteran users with sophisticated trading tools. A growing number of businesses exist to handle storage and management of assets at an institutional level. Some are further insured to reimburse their clients in case of loss of funds.