Institutional custody of digital assets
Sector: Tertiary sector · Industry: Security services · Organisation: SIX Digital Exchange (SDX), Fireblocks · Maturity level: Production
Working with Fireblocks, SIX Digital Exchange moved a regulated custody infrastructure for digital assets into production. It gives institutional clients secure access to crypto assets using multi-party computation and bank-grade governance. In the following months, the production custody service was expanded as planned to include institutional trading and staking services.
Documentation status
- Project status: Production — Production institutional custody service; ongoing expansion to include staking and trading.
- Evidence: Evidence medium
- Editorial review: pending
Description
In a strategic collaboration with Fireblocks, SIX Digital Exchange has established a production custody infrastructure for regulated financial enterprises. This system enables banks and asset managers to securely hold and transfer digital assets without having to develop their own highly complex key storage solutions. The use of modern cryptography ensures that no single actor can gain sole control over assets.
With SDX Web3 Services, SIX Digital Exchange and Fireblocks created an institutional bridge between traditional banking and the market for digital assets. The technical foundation is formed by multi-party computation technology, which splits private keys into multiple shares and performs computations in a distributed manner. This approach effectively protects holdings from internal misuse as well as external attacks on central key archives. Following the production deployment of the custody services, SDX gradually expanded the offering in 2023 to include complementary staking functions and institutional trading. Although the operators confirm successful production operation, no isolated metrics on total assets under custody or percentage cost reductions have been disclosed to date.
Perspectives
B2B — organisations perspective
B2B partners receive a turnkey, regulatory-compliant infrastructure for securing the digital holdings of their end customers. This reduces the development time required for in-house systems while simultaneously meeting the highest regulatory security standards.
B2C — consumers perspective
End customers benefit indirectly from professional custody via their primary banks, but have no direct system access to the platform.
Employees perspective
Specialists in custody and compliance departments work with structured approval processes instead of error-prone manual signature procedures. This considerably reduces operational risk for large-scale transactions.
Benefits
General
- High level of security by avoiding centrally stored private keys
- Regulatory-compliant integration into existing banking processes
- Scalable platform for additional services such as staking and trading
B2B — organisations
- Shortened time-to-market for digital assets
- Reduction of technical and operational in-house development risk
Employees
- Automated approval workflows for institutional transactions
- Clear traceability and logging of all operational steps
Challenges
General
- Complex integration of cryptographic protection layers into existing core banking architectures
- Dynamic regulatory requirements for the custody of digital assets
B2B — organisations
- Dependence on specialised third-party technologies for critical core functions
Employees
- High training requirements for staff regarding MPC protocols and Web3 risks
Technology foundation
The solution is based on multi-party computation cryptography from Fireblocks combined with the Web3 infrastructure services of SIX Digital Exchange. By splitting private keys into mathematical shares, the risk of a single point of failure is eliminated without impairing operational transaction speed.
Implementation examples
SDX Web3 Custody Infrastructure
Regulated financial institutions required a highly secure and compliant way to custody digital assets without having to build their own cryptographic security infrastructures from scratch.
SIX Digital Exchange integrated Fireblocks' MPC technology to provide a bank-grade custody service for institutional clients. Following the launch, the production offering was successfully expanded to include trading and staking services.
To serve institutional clients, SIX Digital Exchange developed SDX Web3 Services by integrating the MPC infrastructure from Fireblocks. The system distributes cryptographic key shares and enables regulated financial institutions to securely hold and transfer digital assets. Later in 2023, the offering was expanded to include initial staking clients and trading options. Specific metrics on isolated custody volumes or cost advantages have not yet been published by the companies.
Elimination of security risks associated with individual private keys as well as ensuring institutional governance and compliance standards.
Tags
Custody, Multi-Party Computation, Digital assets, Financial security, Compliance