What is a Custody?
Quick Definition
Custody is the safekeeping of assets (digital or traditional) by an institution or system responsible for protecting them on behalf of the owner.
Full Definition
Custody is one of the foundational services in finance. A custodian holds assets on behalf of their true owners, takes responsibility for keeping those assets safe, and provides the operational infrastructure to support how the assets are used.
Custody is the safekeeping and administration of assets on behalf of their owners. A custodian is responsible for protecting those assets and providing the operational infrastructure needed to support their use. In traditional finance, custody is typically provided by regulated institutions such as banks, brokerage firms, and specialized custodians.
In digital assets, custody ranges from self-custody, where holders manage their own private keys, to professional custody providers that offer specialized security and operational controls. As institutional adoption has grown, custody solutions have become increasingly sophisticated and tailored to different types of users.
Types of custody
Several custody models exist, each with different trade-offs. Self-custody gives holders direct control over their assets and private keys, while custodial services place that responsibility with a third party. Institutional and qualified custody solutions add operational, security, and regulatory controls that are often required by professional investors and regulated entities.
Custody and Steady
Steady's reserves are held with regulated Swiss and German banking and custody partners, providing institutional-grade safekeeping for our underlying assets. T-Bills are held directly in our name, which means our exposure to custodian failure is minimized. On the holder side, STDY is compatible with any custody model: self-custody with hardware wallets, institutional custody through major providers, or anything in between. The flexibility to work with any custody approach is one of the things that makes Steady fit naturally into institutional workflows.
Related Terms
Asset Segregation
ReadAsset segregation is the practice of keeping client or backing assets separate from the issuer's operational funds, protecting them from the issuer's other obligations.
Custodial vs. Non-Custodial
ReadCustodial means a third party holds the private keys to your assets on your behalf. Non-custodial means you hold your own keys and control your own assets directly.
Secure Custody
ReadSecure custody refers to the storage and management of digital or traditional assets using systems, controls, and procedures designed to protect them from loss, theft, or unauthorized access.
Self-custody
ReadSelf-custody means holding your own private keys and controlling your own digital assets directly, without relying on a third-party custodian.
Other Glossary Items
Learn about common and essential terms related to Steady and other stablecoin protocols.
Algorithmic Stablecoin
ReadAn algorithmic stablecoin attempts to maintain its value through automated rules that adjust token supply based on market demand, rather than holding equivalent reserve assets.
AML
ReadAML (Anti-Money Laundering) refers to the laws, regulations, and procedures designed to prevent the use of financial systems for laundering the proceeds of crime.
APY
ReadAPY, or Annual Percentage Yield, is the standardized rate of return an asset generates over a year, including the effect of compounding.
Arbitrum
ReadArbitrum is a Layer 2 blockchain network built on top of Ethereum, designed to offer faster and cheaper transactions while inheriting Ethereum's security and infrastructure.
Asset Backing
ReadAsset backing refers to the real-world or on-chain assets held by the issuer to support the value of every token in circulation.
Asset Locking
ReadAsset locking refers to restricting access to funds for a defined period or condition, during which they cannot be transferred or used.
Audit
ReadAn audit is an independent examination of a protocol's code, reserves, or operations by qualified third parties to verify accuracy and compliance with stated claims.
Backing
ReadBacking refers to the assets or mechanisms that support a stablecoin's value and help it maintain its intended reference value.
Blockchain Network
ReadA blockchain network is the system of connected participants and infrastructure that validates, records, and maintains data on a specific blockchain.
Blockchain
ReadA blockchain is a distributed digital ledger that records transactions across a network of computers in a secure, transparent, and tamper-resistant way.
Bridge
ReadA bridge is a mechanism that enables the transfer of assets or data between different blockchain networks.
Clarity Act
ReadThe Clarity Act is a proposed US legislative framework intended to clarify the regulatory treatment of digital assets, defining when they should be treated as securities versus commodities.
Collateralization / Over-collateralization
ReadCollateralization refers to the ratio between the value of assets held in reserve and the value of tokens issued. Over-collateralization means holding more in reserves than the value of tokens issued.
Composability
ReadComposability refers to the ability of different protocols, contracts, and tokens on a blockchain to interact and combine with each other seamlessly.
Counterparty Exposure
ReadCounterparty exposure refers to the risk that another party, such as a bank, custodian, broker, or service provider fails to fulfill its obligations, potentially affecting the assets or funds it holds.
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