Author: Ekko An & Ryan Yoon
Source: Tiger Research
Translation: Shaw Golden Finance
TL;DR
The global digital asset custody market has expanded by over 50%, growing from $447.9 billion in 2022 to $683 billion in 2024, evolving from basic custody functions to a core infrastructure for institutional participation.
Custody service providers can be broadly categorized into three models: traditional custodians focusing on regulatory trust and compliance; hybrid models pursuing service diversification; and technology providers competing through security and API-based infrastructure. Jurisdictions such as Singapore, Hong Kong, Japan, and South Korea have each developed unique local custody frameworks.
The future of custody business depends not only on the growth of custody assets but also on how service providers offer financial services on top of custody infrastructure. A deep understanding of regulations and the ability to adapt locally will remain decisive factors for global expansion and the success of new entrants.
1. Why the Custody Market is So Important
Since entering the regulated financial system, the digital asset custody industry has developed rapidly. Initially, the role of custody services was limited, primarily holding digital assets for exchanges. However, as institutional demand has grown, the customer base has become more diverse and extensive. The rise of digital asset exchange-traded funds (ETFs) and digital asset treasury reserve (DAT) companies has further driven institutional participation, significantly increasing the overall scale of custody assets.
This trend is reflected in market data: the global digital asset custody market size has grown from approximately $447.9 billion in 2022 to $683 billion in 2024, an increase of over 50% in just two years. The growth rate is accelerating, with multiple reports predicting that the annual growth rate of the custody market centered on digital assets will reach 17% to 25%. Given the current wave of institutional capital inflow and the continuous expansion of regulatory infrastructure, actual growth may exceed these forecasts.
As the scale of assets requiring custody continues to grow, the demand for secure and reliable service providers is also increasing. This report explores the development of the custody market and examines how different jurisdictions construct and regulate their custody frameworks.
2. The Custody Industry Born from Crisis
The custody industry emerged from a crisis. The turning point was the Mt. Gox incident in Japan in 2014, when approximately 850,000 bitcoins were stolen, causing significant losses to users. This event sounded the alarm for the entire industry: without institutional mechanisms to ensure the security of digital assets, sustainable business operations in the market would be impossible.
This realization drove progress in regulation. Following the Mt. Gox incident, the regulatory framework for digital asset custody gradually improved. Particularly in the United States, custody guidelines similar to those in traditional finance were established. These regulatory developments laid the foundation for building a clearer and more robust structure, allowing the custody industry to develop under defined standards.
3. Types of Custody Services
While most custody service providers focus on core asset custody functions, their market positioning and competitiveness vary significantly due to different strategic focuses. Overall, custody businesses can be divided into three models:
Traditional Custody Model: Focuses on asset custody, similar to traditional financial custodians.
Hybrid Model: Goes beyond custody to provide value-added services such as staking, settlement, or reporting.
Technology Provider Model: Offers custody infrastructure based on SaaS solutions, enabling institutions to operate their own custody systems.
Each model targets different customer groups and needs, competing based on their operational advantages and service depth.
3.1. Traditional Custody
Traditional custody service providers primarily focus on asset custody. Their core value lies in establishing trust through reliable operational records, making them trusted custodians for institutional investors. Coinbase Custody is a leading example.
Coinbase's strength is clearly reflected in the U.S. spot ETF market. As of 2025, among the 11 bitcoin spot ETFs approved by the U.S. Securities and Exchange Commission (SEC), 9 are custodied by Coinbase; among the 9 Ethereum ETFs, 8 are custodied by Coinbase. Such a strong market share makes Coinbase Custody one of the most trusted institutional custodians in the industry.
The company's reputation stems from its early regulatory compliance. In 2018, Coinbase Custody received a limited-purpose trust charter from the New York Department of Financial Services (NYDFS). In 2025, the company was also recognized by the SEC as a qualified custodian under asset custody regulations. This qualification grants it the legal authority to hold client assets on par with banks and broker-dealers.
While many competitors have only recently obtained similar licenses, Coinbase has accumulated years of operational experience under regulation. This experience has become a decisive factor in attracting institutional clients. In the custody service field, while technological maturity is important, a proven operational history remains a key indicator of trust.
Ultimately, the core advantage of the traditional custody model lies in its proven performance. Even technologically advanced newcomers find it difficult to surpass existing custodians that base their credibility on regulatory history and operational records.
3.2. Hybrid Custody
The hybrid custody model is based on basic custody services and expands into a comprehensive service that integrates custody, trading, and asset management. Essentially, they provide institutional clients with a one-stop solution from storage to usage. BitGo is a typical example.
BitGo's service portfolio goes beyond custody to include staking, over-the-counter (OTC) trading, lending, and real-world asset (RWA) tokenization. Through institutional-grade wallets and APIs, BitGo integrates custody with fund management systems, and its staking services are directly linked to custody accounts. BitGo's OTC business has been licensed by the Federal Financial Supervisory Authority (BaFin) in Germany.
BitGo has achieved rapid global expansion through service diversification. By entering flexible regulatory environments in places like Hong Kong, Singapore, and Abu Dhabi early on, BitGo has established a strong local presence and quickly accumulated an institutional client base.
The core advantage of the hybrid model lies in its diversification based on custody. It is not limited to storage but provides interconnected services covering trading, asset management, and tokenization. Traditional custodians grow through regulatory trust, while hybrid models gain momentum through service expansion.
3.3. Technology Providers
Essentially, the technology provider model does not directly hold digital assets. Instead, they provide SaaS infrastructure that enables banks, exchanges, and fintech companies to manage their own custody systems. The leader in this field is Fireblocks.
Fireblocks' technological strength makes it a preferred partner for building secure digital asset infrastructure. Major clients such as BNY Mellon, Galaxy Digital, and Crypto.com highlight its market credibility. As of 2025, its platform manages over $200 billion in assets, serving more than 1,800 institutions. Rich experience and technological reliability make Fireblocks the preferred provider of institutional custody solutions.
In 2024, Fireblocks received a limited-purpose trust charter from the New York Department of Financial Services (NYDFS), granting it the legal authority to hold assets directly. However, the company still primarily focuses on technology services. The role of this license is more to establish trust with institutional clients rather than a shift in business direction. While Fireblocks has developed into an infrastructure company capable of directly holding assets, it strategically leverages this position to solidify its leadership as a technology-first provider.
4. Local Strategies Under Different National Regulatory Frameworks
The financial regulatory differences across jurisdictions are vast, and custody services must adapt to these local frameworks. Due to varying regulatory standards, the demand for local compliance service providers continues to grow. Even in markets less developed than the U.S. (where ETFs and DATs are already quite mature), specialized local custody solutions have emerged to adapt to the regulatory environments of various countries.
4.1. Singapore
As of June 30, Singapore expanded the scope of the Financial Services and Markets Act (FSMA) to include custody within the definition of digital asset services. According to this revision, even custody companies that only serve overseas clients must obtain approval from the Monetary Authority of Singapore (MAS) to operate locally. MAS has indicated that it will strictly enforce the licensing standards for custody services, meaning that market participants will primarily be limited to banks and institutional entities.
4.2. Hong Kong
In 2023, the Hong Kong Securities and Futures Commission (SFC) launched the Virtual Asset Trading Platform (VATP) system, integrating trading and custody functions within a single regulatory framework. This structure goes beyond a simple registration system, requiring both trading platforms and custody functions to be dual authorized.
OSL provides comprehensive custody, over-the-counter trading, and tokenization services, and operates its exchange business. Currently, OSL offers custody services for three of the four approved spot digital asset ETFs in Hong Kong. HashKey collaborates with Standard Chartered Bank to provide fiat deposit and withdrawal services for institutional clients, enhancing the settlement efficiency between digital assets and fiat currencies through its proprietary infrastructure.
Hong Kong's regulatory direction is clear: emphasizing the "regulation + bank collaboration" model. Singapore's custody ecosystem has developed through partnerships between local companies and global service providers, while Hong Kong centers on collaboration between traditional financial institutions and local custodians to attract institutional capital.
4.3. Japan
The Financial Services Agency (FSA) of Japan implements a strict custody framework that prioritizes the protection of client assets. Custodians must store at least 95% of client assets in offline cold wallets. The remaining portion is kept in hot wallets and must be fully collateralized with equivalent fiat currency or bonds. Additionally, external audits are mandatory.
Due to stringent regulatory requirements, Japan's custody market is primarily dominated by traditional financial groups rather than Web3 native companies. Only institutions with sufficient capital and robust infrastructure can meet the FSA's standards.
Mitsubishi UFJ Financial Group (MUFG)/Progmat focuses on tokenization and trust-based infrastructure, leveraging its licensed trust bank status granted by the FSA. JADAT adopts a hybrid model that combines exchange and institutional custody functions. It holds both a virtual asset exchange license and a trust business license under the Trust Business Act, enabling it to provide integrated trading and custody services.
The example of Japan illustrates how strict regulation amplifies the influence of traditional finance. High collateral thresholds and mandatory audits have made banks and trust companies the dominant custodians in the market.
4.4. South Korea
The South Korean custody industry is regulated by the Act on Reporting and Using Specific Financial Transaction Information (referred to as the "Specific Financial Information Act" or "VASP framework"), which governs virtual asset service providers. The South Korean market exhibits two parallel development trends: a financial institution-led collaboration model and a technology-driven specialization model. These models include joint ventures led by traditional financial institutions (such as KODA) and startups that achieve differentiation through security and infrastructure innovation.
Recently, in line with the Financial Services Commission (FSC) advancing the second phase of its corporate digital asset trading roadmap, exchanges have begun actively competing to attract corporate clients. It is expected that once the corporate trading market officially opens, the demand from institutional clients will grow.
A recent turning point in the South Korean custody industry will be the participation of approximately 3,500 qualified professional investors. If institutional investors begin to enter the market in large numbers, the industry may develop towards security token offerings (STOs) and real-world asset (RWA) tokenization. Therefore, regulatory integration can not only meet compliance requirements but also serve as a catalyst for the formation of new markets.
5. The Custody Industry is Just Getting Started
The custody industry is still in its early stages. Its competitive strategies can be broadly divided into two types.
The first is early market entry, exemplified by Coinbase Custody, which has established market dominance by building institutional trust and a strong client base ahead of competitors.
The second is service diversification, as seen with BitGo, which has achieved differentiated competition by offering services such as staking, RWA tokenization, and lending.
As the digital asset market shifts from retail dominance to institutional participation, custody service providers are working to develop bank-grade infrastructure and audit frameworks that meet institutional standards. Meanwhile, technology infrastructure providers that can help newcomers build compliant custody systems are also gaining attention.
However, successful market entry depends on a deep understanding of local regulatory frameworks and ecosystem dynamics.
In the United States, obtaining regulatory approval is crucial for establishing institutional credibility, but newcomers must compete with Coinbase Custody's strong position.
In Hong Kong and Singapore, success relies on collaborative models with banks under clear regulations.
In Japan, strict client asset protection rules make establishing partnerships with large domestic financial institutions a prerequisite for market entry.
In South Korea, participants are diverse, but institutional participation is still developing, and there remains room for growth once regulatory transparency improves.
Ultimately, companies seeking to enter the custody market must prioritize accuracy over speed. Sustainable growth depends on accurately analyzing local regulations and designing robust partnership structures with financial institutions. Even latecomers can find meaningful opportunities as long as their business models comply with regulatory requirements and they establish reliable local partnerships.
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