What Are the Risks Associated with ‘Self-Custody’ for Institutional Investors?

Self-custody for institutions carries risks like the permanent loss of assets due to key mismanagement (e.g. losing the seed phrase) or operational errors. It also exposes the institution to internal fraud or theft if security protocols are weak.

Unlike using a qualified custodian, there is no third-party insurance or regulatory oversight to fall back on, making the firm solely responsible for security and recovery.