The question of who holds the assets is not incidental to tokenization. It is foundational. Before a pension fund allocates $50 million to a blockchain-native fund, before a family office takes a position in a tokenized Treasury product, before any institutional capital of consequence moves on-chain, the custody question must be resolved — legally, technically, and operationally. In the United States, that resolution runs through a specific regulatory category: the qualified custodian.
The Qualified Custodian Requirement
The Investment Advisers Act of 1940, specifically Rule 206(4)-2 — the Custody Rule — requires registered investment advisers to maintain client assets with a “qualified custodian.” That category includes banks, savings associations, registered broker-dealers, registered futures commission merchants, and certain foreign financial institutions. The critical 2024 development: the SEC’s reversal of Staff Accounting Bulletin 121 removed an accounting obstacle that had prevented major banks from holding digital assets on behalf of clients without recording them as liabilities on their own balance sheets. SAB 121, issued in March 2022, had effectively made bank custody of crypto assets economically untenable. Its withdrawal in January 2025 reopened the institutional custody market to the most creditworthy custodians in the world.
The legal architecture matters because tokenized securities are still securities. A fund holding tokenized Treasury bills issued by BlackRock or a tokenized private credit position structured by Hamilton Lane must still comply with the Custody Rule. The blockchain ledger does not substitute for qualified custody; it supplements it, or in some constructions, becomes part of the custody infrastructure itself.
MPC vs. Multi-Signature: The Technical Custody Debate
Two dominant technical paradigms compete in institutional digital asset custody: multi-party computation (MPC) and multi-signature (multi-sig) schemes. Each offers different tradeoffs in security, operational flexibility, and blockchain compatibility.
Multi-signature custody requires a quorum of distinct private keys — typically structured as M-of-N, where any M of N total keys must sign a transaction. The keys are discrete, the cryptographic approach is straightforward, and the security model is intuitive. The limitation: multi-sig is native to Bitcoin and Ethereum but poorly suited to many alternative blockchain environments. It is also operationally rigid; key rotation requires explicit on-chain transactions and can introduce recovery complexity.
MPC custody, by contrast, uses threshold signature schemes (TSS) to distribute key generation and signing across multiple parties without any single party ever holding a complete private key. The signing computation occurs across nodes in a distributed fashion; the private key in its assembled form never exists in a single location. Fireblocks pioneered commercial adoption of MPC-CMP (the multiparty computation with compressed proof protocol), and their deployment numbers now reflect the institutional endorsement of this model.
| Custody Model | Key Storage | Blockchain Compatibility | Transaction Speed | Institutional Adoption |
|---|---|---|---|---|
| Multi-signature | Discrete key files | Bitcoin, Ethereum (EVM) | Moderate | Moderate |
| MPC-TSS | Distributed computation | Chain-agnostic | High | High |
| HSM-based | Hardware modules | Limited | Moderate | Traditional banks |
| MPC + HSM hybrid | Distributed + hardware | Broad | High | Enterprise-grade |
Fireblocks: The Infrastructure Layer
Fireblocks has become, in practical terms, the dominant custody infrastructure provider for institutional digital asset operations. Founded in 2019, the company’s MPC-CMP platform has processed over $4 trillion in cumulative transaction volume and serves more than 1,800 institutional clients including banks, exchanges, payment companies, and tokenization platforms. The company’s clients include BNY Mellon, BNP Paribas, Revolut, and hundreds of digital asset-native firms.
The Fireblocks architecture functions as a policy engine as much as a custody solution. Clients configure transaction approval workflows, whitelisting rules, spending limits, and compliance integrations through a single API. For tokenization platforms, Fireblocks provides programmatic wallet creation at scale — essential for issuers who must provision wallets for thousands of individual token holders. The Fireblocks developer platform has become a standard API layer in the tokenization platform architecture stack.
Anchorage Digital: The Federal Bank Charter Precedent
In January 2021, the Office of the Comptroller of the Currency granted Anchorage Digital a federal bank charter — the first digital-asset-native firm to receive one. Operating as Anchorage Digital Bank NA, the firm provides custody, staking, trading, and financing services to institutional clients under OCC supervision. The federal charter carries substantial implications: Anchorage can operate across all 50 states without individual state money transmission licenses, and it operates under the same regulatory framework as national banks.
Anchorage’s charter was preceded by a conditional approval period during which the firm demonstrated compliance with Bank Secrecy Act requirements, anti-money-laundering controls, and internal governance standards commensurate with federal bank supervision. The firm has since disclosed institutional clients including Goldman Sachs, which used Anchorage as custodian for its digital asset products, and several tokenization platforms that rely on bank-grade custody for their issuances.
BitGo: The Trust Company Structure
BitGo operates a distinct legal structure: state-chartered trust companies. BitGo Trust Company is chartered in South Dakota, New York, and Wyoming — three states that have enacted cryptocurrency-specific trust legislation that explicitly accommodates digital asset custody. Wyoming’s Special Purpose Depository Institution (SPDI) framework and South Dakota’s trust statute allow BitGo to hold digital assets as a fiduciary, with full legal clarity on customer asset segregation and property rights in bankruptcy.
The trust company structure has a specific advantage in the registered investment adviser context: a state-chartered trust company qualifies as a qualified custodian under the SEC’s Custody Rule. This means RIA clients using BitGo Trust Company are in compliance with Rule 206(4)-2 without relying on the broker-dealer carve-out or bank exception. BitGo has used this positioning to serve digital asset fund managers, family offices, and institutional trading desks that require the qualified custodian designation.
BNY Mellon: The Traditional Bank Entry
Bank of New York Mellon — with over $48 trillion in assets under custody globally — received joint approval from the SEC and the New York Department of Financial Services in 2022 to provide digital asset custody services. BNY Mellon’s Digital Asset Custody platform, launched in October 2022, allows institutional clients to custody Bitcoin and Ethereum through the same BNY Mellon relationships they use for traditional securities.
The BNY Mellon approval was significant not merely for the firm’s scale but for its dual regulatory endorsement. SEC approval addresses the RIA custody compliance question. NYDFS approval — under New York’s BitLicense and Trust Company frameworks — addresses state money transmission and trust law. BNY Mellon’s entry signals that traditional custodian banks can provide digital asset custody within their existing regulated entities, rather than through separately chartered subsidiaries or affiliated digital-asset firms.
Coinbase Prime: The Institutional Grade Exchange Custodian
Coinbase Prime provides custody, trading, financing, and prime brokerage services to institutional clients including hedge funds, corporate treasuries, and asset managers. The platform held over $400 billion in assets under custody as of late 2025, reflecting Coinbase’s position as the largest publicly traded digital asset exchange in the United States and its decision to pursue direct institutional relationships rather than limiting operations to retail.
Coinbase Custody Trust Company LLC, a separate New York-chartered trust company, holds client assets in segregated custody. This structure is relevant: exchange assets and custody assets are legally separated, meaning that in a hypothetical exchange insolvency, custody clients hold property claims to their assets rather than unsecured creditor claims against the estate. The FTX collapse, which exposed the commingling of exchange and customer assets, accelerated institutional demand for custody segregation.
SAB 121 Reversal: Unlocking the Bank Balance Sheet
Staff Accounting Bulletin 121, issued by the SEC in March 2022, required entities that hold crypto assets on behalf of customers to record a corresponding liability on their balance sheet. For regulated banks subject to capital requirements, this treatment made digital asset custody economically irrational: holding $1 billion in customer Bitcoin would require booking $1 billion in liabilities, consuming regulatory capital as if the bank itself owned the assets.
The withdrawal of SAB 121 in January 2025, following bipartisan congressional pressure and the confirmation of new SEC leadership, removed this accounting treatment. Banks can now hold digital assets in custody without the corresponding balance sheet liability. The practical effect: JPMorgan Chase, State Street, Northern Trust, and other major custodian banks are no longer structurally deterred from expanding digital asset custody operations. The SAB 121 reversal is widely understood as the most consequential near-term catalyst for institutional custody infrastructure expansion.
The Road to Full Institutional Custody Integration
The convergence of qualified custodian regulation, MPC technology, federal bank charters, and the SAB 121 reversal creates the conditions for institutional digital asset custody to reach parity with traditional securities custody. The smart contract layer that governs tokenized securities increasingly incorporates custody-aware logic — forced transfer functions, compliance modules, and administrator controls that align with custodian authority rather than operating around it.
For institutional investors evaluating tokenized asset programs, the custody stack assessment has become a due diligence standard. Who holds the assets? Under what regulatory framework? What is the bankruptcy remoteness structure? What MPC or multi-sig configuration governs signing? These are not theoretical questions. They are the questions that determine whether allocators can invest in tokenized securities at all, and the infrastructure covered in this analysis represents the current state of answers.