How digital asset custody is reshaping digital finance
In digital economies, secure storage and management of digital assets is critical, driving rapid growth in digital asset custodians.
This article was originally published in The Business Times.
As finance becomes increasingly digital – from payments to tokenised assets – the question is no longer whether money and financial assets will move through digital channels, but how it will be safeguarded. That is where digital asset custody is emerging as a critical layer of the financial infrastructure.
While custody is not new, its role is being reshaped in the digital era.
Safekeeping of assets is a concept that has roots in the 1700s, especially in Europe, when goldsmiths and bankers needed to store physical assets such as gold coins and other valuables, which is still being done today.
What gave birth to modern custody was the rise of securities in the 1800s, when people started to hold paper share certificates and bonds.
By the early 1900s, banks started to offer dedicated custody services to institutional clients, with settlement support, income collection, and corporate actions processing added to the list.
Today, banks such as Standard Chartered have started to offer digital asset custody services, or the safekeeping of cryptographic keys or passwords for corporate or institutional clients in EMEA and Asia markets.
This is driven by the rise of digital assets which can offer more efficiency, transparency and safety.
As companies increasingly need 24/7, instant, programmable and transparent solutions like payments, remittances and investments, it is only natural that digital assets and thereby custody of such assets becomes more firmly lodged in the finance ecosystem.
The backbone of digital finance
Currently, the global traditional custody market holds around USD200 trillion to USD250 trillion in assets under custody. Comparatively, the global digital asset custody remains small – valued at approximately USD700 billion in 2025, but the rise of tokenised assets including funds, treasuries and stablecoins, will inevitably drive demand for robust digital asset custody infrastructure.
The Bank projects that the global tokenised real-world assets (RWA) market, excluding stablecoins, will surge to USD2 trillion by 2028. Boston Consulting Group projects tokenised assets could reach aroundUSD16 trillion by 2030, while McKinsey puts the figure closer to USD2 trillion to USD4 trillion.
The tokenisation of funds is now largely done through asset managers who look to distribute to untapped Web3 investors, or a collateral play where investors look to optimise the use and speed at which they can deploy collateral.
By being on a blockchain, a unified digital ledger, institutional investors can do instantaneous transactions, which matters because this significantly reduces settlement risks, optimises capital efficiency and enables real-time, 24/7 liquidity.
As utilisation of tokenised assets and adoption of stablecoins scale, digital asset custody will become the backbone of digital finance.
Standard Chartered projects the total market cap of stablecoins to reach USD2 trillion by end-2028.
Regulatory clarity and institutional adoption
Regulation is another key driver of digital asset custody.
In Singapore, digital asset custody for payment activities is regulated under the Payment Services Act while custody of tokenised capital markets products comes under the Securities and Futures Act. Digital assets services are also broadly governed under the Financial Services and Markets Act by the Monetary Authority of Singapore (MAS), depending on the services provided by the entity.
Custodians must be licensed and must segregate client assets from their own, implement robust controls over management of the accounts and customer records, tech risks, as well as cybersecurity and money laundering risks, among others.
Firms are also required to undergo independent audits and provide clear disclosures on how customer assets are held and protected, and the processes for handling any losses of customers’ assets arising from fraud or negligence.
This regulatory clarity is also shaping how institutions expand their digital asset capabilities.
Institutional demand in Asia is already moving from theory to traction. In Hong Kong, banks processed HKD26.1 billion of transactions involving digital asset-related products and tokenised assets in the first half of 2025, a 233 per cent jump from a year earlier. This comes as more banks were allowed to distribute such products and offer custody.
Headwinds for custodians
Despite the promising outlook, digital asset custodians face a complex set of structural headwinds, chief among them regulatory fragmentation across jurisdictions.
There is currently no global standard for digital asset custody, with differing rules on asset classification, segregation and capital requirements. This creates operational complexity for institutions seeking to scale across markets and introduces legal uncertainty around how digital assets are held and protected.
Interoperability is another challenge.
As digital asset markets fragment across multiple blockchains, protocols and market infrastructures, tokenised funds, stablecoins and digital bonds are increasingly issued on separate networks.
Without interoperability, digital assets risk becoming fragmented pools of liquidity rather than a unified market and this limits their usefulness for institutional investors.
To overcome this, the Bank, for instance, is designing custody platforms that bridge traditional and digital markets. This includes building infrastructure that can operate across multiple blockchains and asset types, while maintaining the governance, control and risk management standards expected of traditional custody.
Overcoming challenges
In practice, much of today’s tokenisation still mirrors traditional structures.
For instance, many tokenised money market funds remain backed by conventional instruments, effectively creating a digital representation of an existing product.
It is vital to ensure a tokenised money market fund remains fully aligned with its underlying assets – both legally and operationally.
This approach also reflects a shift away from single-network or proprietary systems into one where custody platforms operate across multiple digital ecosystems that enables institutions to access a wider range of assets while avoiding technological lock-in. Ultimately, building digital asset custody for the long term will require not just technological innovation, but coordination across regulatory frameworks, market infrastructure and asset standards.
As more money moves onto digital rails, the ability to safeguard and mobilise assets across systems will define the next phase of financial market infrastructure.
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