by Lior Lamesh, Forbes Councils Member Customers have trusted banks with custody of their assets for centuries, believing a bank vault is safer than keeping wealth under the mattress. As digital assets gain value and adoption increases, particularly in light of an incoming administration promising favorable regulatory change, the need for robust custody solutions remains vital. Whether you’re a traditional financial institution or a crypto-native, understanding how to protect significant digital wealth is crucial. This article breaks down the digital custody technology evaluation process into five clear steps for making an informed decision: Lock down your assets Master the legal maze Future proof your tech stack Streamline control with flexible policy management and integration capabilities Evaluate cost vs. long-term value 1. Lock down your assets Security is paramount in digital asset custody. Your custody solution must provide robust protection against theft. It should pass cybersecurity tests—penetration testing, vulnerability scanning and security audits—while also undergoing social engineering and physical security assessments. Consider the DMM hack: Despite the Japanese regulations that require a percentage of assets to be kept in cold storage, over $300 million was stolen. The damage to a financial institution’s reputation after a breach? Irreversible. “Secure enough” isn’t good enough when it comes to public funds; hacks are not an option. If you want absolute trust, you need a custody solution that guarantees no connectivity for bad actors. To ensure your assets are genuinely theft-proof, adopt a custody solution that remains offline all the time. Cold and warm solutions serve operational purposes, but only unequivocally impenetrable custody, with encrypted one-way communication and zero digital input, offers true security. Ideally, you want to balance the security of wholly offline custody with day-to-day operational accessibility. 2. Master the legal maze The regulatory landscape for digital asset custody is rapidly evolving and varies by jurisdiction. Your custody solution must adhere to local regulations, particularly regarding anti-money laundering (AML) and know your customer (KYC) laws. Your tech provider should enable you to comply with local regulations and adhere to data protection laws. For example, in the United States, custodial service providers might need to register as a Money Services Business (MSB) and comply with the Bank Secrecy Act (BSA). Certifications and audits, such as SOC 2 Type 2 and ISO 27001 compliance, are vital indicators of a custody provider’s commitment to regulatory compliance and operational integrity. Failure to adhere to regulations can result in severe consequences. Just look at the recent case of Galois Capital. Galois settled the lawsuit from the SEC for $225,000 without admitting wrongdoing, but the damage was done. 3. Future proof your tech stack Scalability and performance are critical when evaluating a custody solution. It must handle large transaction volumes while maintaining speed and security. Beyond safeguarding assets, the custody platform needs to support high transaction throughput, real-time data processing and streamlined workflows to meet your day-to-day operational demands. A robust custody solution should integrate effortlessly with your institution’s existing operational, financial and compliance systems. Look for providers that offer APIs or connectors to facilitate smooth data exchange and minimize disruptions. Additionally, operational resilience—such as real-time monitoring, audit logs and automated reconciliation features—ensures that your custody infrastructure supports not only secure storage but also efficient, ongoing management of digital assets. 4. Streamline control with flexible policy management and integration capabilities A robust custody solution is secure, but it also empowers institutions with customizable control over workflows and policies. Our company’s Policy Engine, for example, enables granular control over transaction approvals, user permissions, and access settings—allowing administrators to tailor workflows to fit specific operational needs and compliance requirements. This flexibility ensures that institutions can enforce security standards without compromising on usability. Look for a platform that integrates seamlessly with existing core banking systems, enabling smooth interaction between digital assets and traditional finance. Whether users are managing transfers, staking or tokenization, the platform should offer customizable dashboards, enabling fast, intuitive access across desktop and mobile. The result is a custody solution built for real-world operations, providing control, ease and agility without a steep learning curve. 5. Evaluate cost vs. long-term value Initial low prices for custody solutions can be misleading, often concealing hidden fees or additional charges that emerge as usage scales. When evaluating costs, it’s crucial to look beyond upfront pricing and consider long-term implications, such as whether transaction fees or maintenance costs will rise as your assets grow. A true cost vs. value analysis means considering the full financial impact of your custody solution over time. While a higher-quality solution may have a larger initial cost, it’s likely to offer stability, scalability and fewer unexpected expenses. Better to invest in a secure, predictable solution with transparent pricing—protecting you from the risk of costly incidents like hacks or service outages. Remember, you can’t afford to be the victim of a hack even once. In digital asset custody, cheap won’t always make you cheerful. Conclusion Evaluating your custody solution provider involves a thorough examination of several critical factors to ensure the safety and accessibility of your digital assets. First, assess the security measures in place, including the use of encryption standards and incident response plans. Second, consider the regulatory compliance of the provider, ensuring adherence to local and international laws and the presence of necessary certifications and audits. Third, evaluate the technological infrastructure, focusing on scalability, performance and integration capabilities. Fourth, ensure maximum flexibility and control over your users and their privileges. Finally, consider the cost and fee structures, performing a cost vs. value analysis to understand the trade-offs between different solutions. Ultimately, the decision comes down to your individual needs and preferences. It’s important to thoroughly understand and evaluate each aspect of the custody solutions available. The integrity of all financial solutions is based on trust, and custody is the root of trust when it comes to your customers’ digital assets. The original version of this article was published by Forbes.com.