Crypto Custody: An Empirical Assessment

Abstract This article provides a comprehensive dataset on the terms and conditions (T&Cs) set by leading providers of crypto custody and wallet services. The sample studied reveals a dichotomy within the crypto custody industry: some custodians seek to protect their clients’ rights and interests while others provide T&Cs at odds with any meaningful client protection. In such an environment, financial regulation can serve three purposes. It can promote a level playing field for crypto custodians, ensure an adequate level of client protection regardless of client due diligence, and reduce the likelihood of costly disputes, thereby lowering both information asymmetry and transaction costs. This article provides an overview of how crypto-assets are held in custody before outlining the research sample. The article then presents findings on custody practices, including safekeeping, key storage, outsourcing, asset segregation, insolvency protection, client entitlements, reuse, liability cap, and choice of law, courts, and arbitration. Finally, the argument and conclusion are set out.