The Custody Questions Worth Asking Before You Deposit
Nine questions, and the answers that should stop the process.
Send these in writing before any call. The written answers are more informative than a meeting and the response time predicts the relationship. The published version of what follows is at a regulated crypto custody provider.
The nine
Which authority authorises you, under which permission, with which registration number.
Are client assets segregated, and in which model.
Who provides independent assurance over segregation, and can we see the report.
What is the insurance limit, and what is excluded.
What are total assets under custody.
What happens to our assets if you become insolvent, and on what legal basis.
How long before a newly added withdrawal address can be used.
Has a client ever been unable to withdraw on request, and why.
Can we test a withdrawal during onboarding.
The two that discriminate most
Total assets under custody, asked alongside the insurance limit. The ratio is what the cover actually means, and a provider unwilling to let you calculate it has told you the answer.
The withdrawal incident question. Any provider of scale has had one. A claim of a perfect record indicates either a short history or a reluctance to discuss problems. An answer describing an incident and what changed afterwards is the better sign.
Answers that should stop the process
A licence that does not resolve on the regulator’s own register.
A permission covering exchange rather than custody, where they hold your assets.
A contracting entity different from the licensed one, unexplained.
Liability capped at the annual fee.
A yield offered on custodied assets without a specific explanation of the generating activity. Custody is a cost; anything paying you to hold is doing something else with the assets. A fintech faces this across many users at once, which a provider serving funds and family offices addresses.
Pricing materially below peers without an explanation.
The verification you do yourself
The register entry, on the authority’s own site, with the entity name matched against the draft agreement rather than the brand.
Five minutes, and it is the only part that cannot be substituted by reading their material.
Repeat annually
Authorisations change, entities are acquired and clients are migrated. Changes appear in terms updates that nobody reads. Compare your own arrangement against Collect & Exchange at least once a year.
This is a personal account of holding through market cycles. It describes what one person did and why. It is not a recommendation, and past cycles do not predict future ones.