Why more investors are custodising cryptocurrencies with regulated banks

Why more investors are custodising cryptocurrencies with regulated banks

Billions lost in digital assets

One of the early mantras of Bitcoin was to “be your own bank”. Many early cryptocurrency investors, who were critical of centralised entities, took advantage of the newly available hardware and software wallets to hold and manage their digital assets themselves.

Self-custody enabled individuals to be in full control of their digital assets, as well as to avoid fees after the initial purchase. However, this strategy is not without significant risks.

Approximately 3 million out of the 21 million Bitcoins that have ever been mined are lost. These assets are worth over 138bn USD) [1]

These significant losses are due to several reasons, including the loss of private keys, sending Bitcoins to incorrect addresses, and by the owner passing away without enabling access to their assets to their will’s beneficiaries.

As Bitcoin and other cryptocurrencies are decentralised platforms with no central entity managing the network, there is no customer service to call. So for example, when an investor looses their private key without the relevant recovery data, the assets will be permanently lost.

The added value of regulated, third-party custody

Clients do not have to manage private keys

At Sygnum Bank, digital asset wallets are integrated in the e-banking portal, and function in the same way as fiat accounts in a traditional bank. This means investors do not have to deal with the technical elements of digital asset custody such as managing private keys and storing the recovery phase data. If a client forgets his e-banking password, he simply resets it.

Secure inheritance of assets

To date, billions of dollars’ worth of cryptocurrencies have been lost as investors did not properly instruct their relatives on how to access their digital asset holdings in the case of their death. As a regulated Swiss bank, Sygnum automatically provides authorised relatives and beneficiaries full access to the digital assets.

Peace of mind with full regulatory compliance

Many digital asset investors hold their investments directly on the platforms where they purchased their cryptocurrencies, such as exchanges. Recent moves by some regulators, which enable them to stop withdrawals and block funds from trading on some unregulated venues, presents significant new risks for these investors. Holding and trading digital assets with a regulated bank avoids these risks, and enables investors to focus on what truly matters – their investment decisions.

Reduced complexity via automated tax reporting

Many digital asset investors are familiar with the cumbersome process of manually creating a tax report for their investments; a process made more complex when assets are held across several wallets. At Sygnum, investors only have to download their tax reports in their e-banking portal, in the same way as for their fiat accounts in traditional banks.

Complete trust in Future Finance

While digital assets do allow the freedom and independence of self-custody, this is the digital version of keeping your money under the mattress. While it avoids fees, the responsibility and complexity that comes with this strategy could result in the total and permanent loss of your assets.

With Sygnum Bank as counterparty, investors can access trustworthy, fully regulated and

institutional-grade custody for their digital assets. Private keys are secured in Tier-4 (military-grade security) Swiss data centers managed by Custodigit, a joint venture between Sygnum Bank and Swisscom, Switzerland’s leading ICT company. This gives them the twin benefits of direct ownership and control of their digital assets, as well as complete trust that their investments into Future Finance are completely secure.

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[1] https://www.nytimes.com/2021/01/13/business/tens-of-billions-worth-of-bitcoin-have-been-locked-by-people-who-forgot-their-key.html


This document is purely for educational purposes and has been issued by Sygnum Group. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication. It does not constitute an offer or a recommendation to subscribe, purchase, sell or hold any security or financial instrument. It contains the opinions of Sygnum Group, as at the date of issue. These opinions and the information contained herein do not take into account an individual‘s specific circumstances, objectives, or needs. No representation is made that any investment or strategy is suitable or appropriate to individual circumstances or that any investment or strategy constitutes personalized investment advice to any investor. Therefore, you must verify the above and all other information provided in the document or otherwise review it with your external advisors. Some investment products and services, including custody, may be subject to legal restrictions or may not be available worldwide on an unrestricted basis. The information and analysis contained herein are based on sources considered as reliable. Sygnum Group uses its best efforts to ensure the timeliness, accuracy, and comprehensiveness of the information contained in this document. Nevertheless, all information indicated herein may change without notice.

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