How Do Regulated Crypto Exchanges Mitigate Custody Risk for Physically-Settled Futures?

Regulated exchanges mitigate custody risk by using qualified, institutional-grade custodians that employ robust security measures. They often utilize cold storage for the vast majority of assets, which keeps private keys offline and inaccessible to hackers.

Furthermore, these custodians typically carry insurance policies to cover potential losses from security breaches or operational errors, providing an extra layer of protection for the assets.