Custody has been an instrumental part of financial services since the founding of Northern Trust in 1889, to the launch of crypto custodians such as Anchorage Digital in 2017. During those 128 years and counting, the role of a custodian has seen a fundamental, digital-fuelled shift.
The term “custodian” no longer has a simple definition and is no longer just about safeguarding assets. Instead, the role of custody has become a catalyst for institutional adoption. Custodians are now central to operational efficiency, risk management and even enabling liquidity in entirely new ways.
Custody redefined
Darren Jordan, chief commercial officer at Komainu, explains that the developing role of digital custody spans security, governance, and regulatory alignment.
“The custodian takes responsibility not just for securing and storing the cryptographic keys, but also the governance around access permissions that define who can initiate, approve, and execute transactions.
“And, crucially, we operate within a regulated framework,” he said. Jordan explains that institutions are now active within the space, not just Bitcoin but tokenised RWAs such as MMFs (money market funds) and bonds. These institutions “need a regulated custodians for safekeeping, governance and compliance”.
Standard Chartered has taken a pioneering role in this shift, holding the status of the only global, systemically important bank offering custody of crypto assets at the time of writing.
Waqar Chaudry, head of digital assets, financing and securities services, corporate and investment banking, at Standard Chartered, explains the institutional perspective. “Our role as a custodian is to safeguard tokens, whether crypto tokens or tokenised securities,” he said.
“We provide a bank-compliant, highly regulated and secure technology infrastructure that controls the operational processes needed to protect clients’ assets.
“Once those assets are protected, we also handle settlement and execute client instructions to move assets. That’s core to our role.”
The custody process has become a holistic one. New services and infrastructure have allowed custodians to innovate in ways that were previously thought impossible.
Separation and integration
An interesting development in response to the financial ecosystems digital shift is the tightening integration of trading and post-trade systems.
Luke Dorney, head of custody at LMAX Group, deems this development one of the trickiest current challenges.
“The integration between trading and post-trade systems is currently the industry’s greatest challenge and is complicated by the fact that no two custodians have the same technology stack or operational workflows,” says Dorney.
“This lack of standardisation makes it incredibly difficult and time-consuming to build automated, real-time integrations.”
From the perspective of another long-standing institutional player, Northern Trust, Anna Matson, senior vice president of digital assets and financial markets, points directly to how digital models collapse the gap between trading and settlement.
Matson foresees “broader interoperability between traditional and DLT systems, and the emergence of hybrid market infrastructures.”
“There are a couple of those starting to emerge, but there’s still a lot of markets to work on,” she adds.
Together, these shifts signal an industry edging towards real-time, synchronised markets, where execution and settlement move in lockstep rather than separate lanes. It’s early, and far from seamless, but the groundwork being laid today will ultimately turn digital capital markets from an experiment into everyday infrastructure.
Regulation: friction and fuel
Regulation is often seen as restrictive, but these standards build the confidence necessary for institutional adoption.
From the UK Cryptoasset Regulatory Framework to France’s Transitional MiCA Measures to the DTCC’s blockchain-based digital collateral management platform, regulation is providing institutional-grade entry standards.
For Standard Chartered, regulation is one of the biggest forces shaping how, and how quickly, the bank can innovate.
Unlike many players still circling the space, the bank already operates under the scrutiny that comes with being a global institution.
Chaudry points to a particular framework influencing the industry’s trajectory: the BIS/BCBS D545 standard, issued by the Basel Committee on Banking Supervision.
The standard proposes how banks should treat crypto assets from a capital perspective, essentially dictating how much capital regulated institutions must hold against different types of digital assets.
“We publicly submitted feedback on it, and our stance is clear: regulation should support innovation and adopt a risk-based approach to capital allocation, same risk, same treatment,” Chaudry says.
“We’ve built our frameworks accordingly and believe we now have best-in-class technology and operating models.”
But rules on paper are not the same as how they are applied. BIS sets standards, not enforceable rules; local regulators implement them. Banks can face a patchwork of interpretations across jurisdictions.
“One challenge is the inconsistency of interpretation. BIS is not a regulator, so PRA in the UK may interpret rules differently than the HKMA, or regulators in the Middle East or the US,” he adds.
Regulation may slow down the market, but it also builds confidence. For a bank such as Standard Chartered, it is a catalyst, not a constraint.
Industry response
As with many fast-paced industries, the response from custodians has been one largely of collaboration.
Many of the major developments have seen the integration of financial technology and traditional banks.
“In almost every panel on this topic, someone cites the need for collaboration, and I think that’s entirely valid,” said Matson.
“Continued public–private partnership is essential. Innovation carries real cost, and mutualising elements of the infrastructure can ease that burden.” This is evident through Zodia, an institutional-grade custody solution for cryptocurrencies launched by SC Ventures and Northern Trust.
Verena Hess, digital asset programme manager, securities services at BNP Paribas echoes Matson’s statement: “Many institutions are teaming up with technical providers for very specific DLT-related services.”
It is evident that the custodians taking part in the digital race are looking for interoperability and harmonisation, two things that partnerships are beginning to unlock.
“We are also seeing concrete use cases where blockchain can unlock new value – such as enhanced collateral mobility, more efficient intraday liquidity management, or tokenised real estate,” says Hess.
LMAX Group, however, are pointing to collateral mobility as a major custody development.
“The most significant development is the move towards models that enhance capital efficiency and collateral mobility,” says Dorney.
“This includes the rise of custody hubs and off-exchange collateral solutions, allowing institutions to use their custodied assets to back trading activity on an exchange without physically moving them. This structure provides both security and efficiency.”
This evolution signals something deeper: custody is no longer a passive, end-of-chain function. It is becoming an active enabler of liquidity and capital efficiency – capabilities that traditional markets have historically struggled to unlock without friction.
Collaboration is therefore a prerequisite for building an interoperable market where tokenised assets can actually deliver on their promise.
Tokenised benefits
Collateral mobility has been deemed one of the major areas of custody development, but it is also one of the clearest benefits of a tokenised market for participants across the ecosystem.
“Collateral mobility is another major benefit. In stressed markets, the ability to move collateral within seconds can be the difference between staying solvent or being liquidated,” adds Jordan.
Tokenisation is what makes that possible. It strips out the friction baked into today’s collateral chains. Custodians can verify ownership and release assets near-instantly, rather than relying on the manual, multi-step processes that traditionally slow markets down.
“There’s definitely a lot of noise in the space, many protocols chasing the same problem, but the real benefit is efficiency: reduced counterparty risk, faster collateral movement, and improved market stability.”
“It goes far beyond simply ‘fractionalising real estate,’ which is often the simplistic narrative,” he says.
Instant settlement is perhaps the more obvious benefit of a tokenised market. Dorney explains that new custodian processes are already pushing capital efficiency into a different league.
“By representing assets on-chain, they can be moved and settled in near real-time, 24/7, collapsing traditional T+2 settlement cycles. This frees up capital that would otherwise be locked in transit,” he says.
“For institutions, this also opens new possibilities for yield generation on assets that would otherwise be dormant, all within a more transparent and automated post-trade environment.”
The future of custody
Looking ahead, the evolution of custody is set to accelerate, with custodians taking an increasingly central role in linking traditional finance with digital markets.
Digital custodians are expected to remain at the forefront of financial services, with their growing involvement acting as a key catalyst for broader institutional adoption.
Matson positions custodians such as Northern Trust to continue navigating these changes carefully and strategically.
“We’ll be here to help clients navigate this new era. Custody remains a strategic enabler for capital markets, digital or otherwise. Legal and regulatory clarity is improving, but harmonisation is still needed,” she says.
Komainu’s Jordan adds perspective on the timeline:
“This won’t happen overnight, probably not even within few years. You’re effectively unwinding decades of market infrastructure. I’d say a five- to ten-year horizon for true systemic efficiencies.”
“But within a year, you’ll see high-profile entrants accelerate adoption and push regulators to recognise the risk-reducing benefits of real-time settlement.”
“Ultimately, the long-term goal is to get traditional securities issued natively on-chain. That takes time, but it’s coming.”
Standard Chartered is equally committed to embedding digital assets into its core operations, deeming them crucial and here to stay.
“The key point is that Standard Chartered is heavily investing in digital-asset infrastructure, operations, licensing and capabilities because clients actively demand it, and because we see digital assets becoming a permanent part of our offering,” Chaudry said.
“Digital assets won’t be a side topic, they’ll become a core part of how we operate.”
Taken together, these perspectives underline that custody is entering a transformative era. One defined by interoperability, operational innovation, and a sustained commitment to making digital assets an integral, enduring part of mainstream finance.
Custodians are no longer the quiet gatekeepers; they are now the architects enabling the markets of tomorrow.
