Everything You Need to Know About Custody Wallet Service for Digital Assets

| November 17, 2023

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Digital assets refer to any form of electronic content or web resources that possess inherent value and can be owned or controlled by individuals or organizations. Traditional digital assets include items such as digital music files, e-books and digital arts. With the advent of blockchains, digital assets have evolved into more sophisticated forms, including cryptocurrencies, non-fungible tokens (NFTs), and complicated financial instruments that reside on decentralized networks or distributed ledgers.

As new forms of digital valuables gain widespread acceptance, the demand for secure and reliable storage and crypto treasury management solutions has become paramount. This is where digital asset custody services play a pivotal role, constituting a crucial element within the digital economy’s infrastructure. Here, we explore key concepts of digital asset custody, including the various digital asset wallet types and the role of digital asset custodians, to help you navigate this burgeoning industry with ease and confidence.

 

What is Digital asset custody?

Central to the concept of digital asset custody is the notion of a wallet, which serves as the repository for an asset owner’s cryptographic keys. At its core, all wallets store two types of keys: private and public. These keys work together to ensure the secure execution of each transaction, such as a cryptocurrency purchase.

Private keys are essentially large, randomly generated numbers that serve as proof of ownership for a digital asset. They come into play when transferring assets to others or when spending cryptocurrencies. To validate each transaction, the owner digitally signs it with their private key stored in their self custody wallets. It is of utmost importance that private keys remain absolutely confidential, as sharing them can potentially lead to the transfer of funds to another party.

Public keys, on the other hand, are also significantly large numbers that play a role in transactions. Unlike private keys, public keys can be shared openly. These public keys are used to generate a deposit address for the owner’s custody wallet. When assets are transferred between owners, deposit addresses are shared to determine the destination of the assets.

 

Categories of digital asset custody

Digital asset custody services typically fall into two categories: self-custody and custody services.

Self custody crypto wallets, a fundamental and often celebrated feature in the world of cryptocurrencies, empowers individuals to autonomously manage their digital assets. While third-party providers can assist in this process through polygon matic wallet or multisignature wallet services and hardware solutions or cold storage wallet solutions, ultimate responsibility and control reside with the individual.

In contrast, custody or crypto treasury management services offer a custodial experience akin to traditional asset management. For asset managers and advisors, custody services tend to be the preferred choice due to regulatory compliance, risk management, technical proficiency, and adherence to best practices. Unlike the best self custody wallet, these custody service providers oversee asset transfers, settlement times, and security. However, the absence of standardized regulations poses a challenge for advisors in this field.

 

Choosing a custody solution: A recommended framework

Though not exhaustive, the following provides a broad overview of a standard assessment framework.

Regulatory considerations

Custodianship of digital assets carries its own set of legal responsibilities. In jurisdictions like the United States, registered investment advisors are obligated to engage “qualified digital asset custodians.” Although the precise criteria for this classification in the context of digital assets remain somewhat ambiguous, this requirement tends to benefit digital asset custody platforms subject to more comprehensive regulations. On a global scale, licensing and regulatory prerequisites can exhibit significant disparities, with some nations not mandating licensing at all.

Given the ongoing development of digital asset regulations in the United States and around the world, collaborating with custodians and providers of wallets for cryptocurrency that adhere to well-defined regulatory standards and possess robust internal frameworks serves as a safeguard against fraudulent activities and reinforces the integrity of business operations.

Transparency measures

Digital asset custody services are expected to provide a certain degree of transparency. Are they conducting thorough audits, not only on their financial records but also on their IT infrastructure, risk management procedures, and information security protocols? Blockchain-based custody solutions have the potential to enhance transparency through technologies like “proof of reserves,” which can help reduce the risk of fraud and irresponsible financial practices. “Proof of reserves” allows companies to demonstrate to all stakeholders that customer-pledged assets are securely held.

While on-chain commitments can be readily verified for transparency, off-chain commitments necessitate additional scrutiny. Consequently, additional measures, such as audits, become imperative to ensure that companies are not involved in unauthorized rehypothecation, commingling, or off-chain pledging of assets.

Compatibility with investment strategy

At times, there may be uncertainty regarding a crypto treasury management and digital asset custodian’s ability to effectively safeguard the assets required to underpin the investment strategy. This uncertainty often arises due to technological constraints and regulatory limitations, leading digital asset custody platforms to offer support for varying asset combinations. To mitigate potential issues, obtaining explicit assurances about all pertinent assets can obviate the necessity for engaging multiple custodians.

In many cases, high-frequency trading strategies and permissionless DeFi activities are not within the purview of providers subject to stricter regulations. It’s essential to recognize that the compatibility between an advisor and a custodian operates as a mutual consideration. The custodian must possess the capability to facilitate the execution of the advisor’s strategy, necessitating alignment across elements such as strategy, market access (execution and trade settlement), custody, and the associated reporting when fostering institutional relationships.

Be deliberate in due diligence

Digital asset custody is a multifaceted undertaking. While here, we’ve presented a foundational framework, the practical execution involves a range of technical factors, including organizational structure and private key management. Selecting the ideal digital asset custody services demands meticulous scrutiny of regulatory compliance, security protocols, and transparency practices. Nevertheless, with due diligence and adequate resources, digital asset custody with polygon matic wallet, multisignature wallet, defi wallet and cold wallet crypto support can deliver heightened safety, transparency, and cost-efficiency compared to conventional custody models.

 

Importance of custody wallet solutions for Institutions

Institutional investors have a compelling need for custodial services with the best self custody wallet support, primarily driven by the imperatives of risk reduction and regulatory compliance.

By segregating the entity responsible for asset storage from the entity entrusted with asset management, financial institutions can focus on their core competencies. This demarcation also mitigates the risk associated with a single individual having access to all the assets. Typically, custodians with digital asset wallet support are well-established financial institutions that bear a significant reputation risk, thereby ensuring alignment with their clients’ best interests.

Regarding regulatory considerations, leading global regulatory bodies such as the United States Securities and Exchange Commission (SEC), the United Kingdom’s Financial Conduct Authority, and the Monetary Authority of Singapore, among others, mandate that institutional investors hold customer funds with regulated custodians. These regulated custodians with self custody crypto holding support are typically broker-dealers or banks.

Types of Custody Solutions

Custodial Wallets

To grasp the functionality of a custodial wallet, it’s essential to begin with an understanding of how cryptocurrency wallets operate. Cryptocurrency wallets don’t actually store a user’s funds; instead, they house the public key for conducting transactions and the private key, which authorizes transactions.

As the name implies, a custody wallet involves a third party assuming custody of users’ private keys. This third party takes on full responsibility for managing the user’s digital asset wallet key, signing transactions, and safeguarding the user’s cryptocurrency assets.

Typically, custodial wallets are accessible through cryptocurrency exchanges or specialized custodial wallet providers in the form of mobile or web applications. When users access their wallet accounts, they utilize the interface provided by the wallet provider to oversee their funds and execute transactions.

In this arrangement, users place their trust in the service provider to securely store their tokens and implement robust security measures to prevent unauthorized access. These protective measures may encompass two-factor authentication (2FA), email verification, and biometric authentication methods such as facial recognition or fingerprint verification.

Non-custodial Wallets (Self-Custody)

A non-custodial wallet, often referred to as a self custody wallet, places the responsibility for managing one’s own crypto funds squarely on the owner. In this setup, the user exercises full authority over their cryptocurrency holdings, oversees their private key, and autonomously conducts transactions.

Non-custodial wallets or self custody crypto wallets come in various formats. Browser-based wallets, for instance, function as browser extensions, enabling users to input their private key and initiate transactions. Mobile wallets are downloadable mobile applications designed for this purpose. On the other hand, hardware wallets are physical devices, favored by many for their enhanced security, as they can be used and managed offline.

Non-custodial wallets assign users with a crucial seed phrase. During single-sig, multi-signature wallet or cold wallet crypto wallet creation, users are prompted to note and safeguard a set of 12 randomly generated words, commonly referred to as a ‘recovery,’ ‘seed,’ or ‘mnemonic’ phrase. This phrase serves as the foundation for generating both public and private keys and serves as a backup or recovery mechanism in the event that users lose access to their original device. It’s important to note that anyone in possession of the seed phrase can gain full control over the funds held in the user’s wallets for cryptocurrency storage. If the seed phrase is ever lost, the user faces the risk of losing access to their funds.

The user assumes responsibility for managing and executing each transaction. Private keys are essential for sending funds and completing other transaction activities. Depending on the specific non-custodial wallet or the best self custody wallet in use, transactions can either be immediately reflected on the blockchain or signed offline and subsequently uploaded to the blockchain for confirmation at a later time.

Assessing Custody Solutions

To begin, it’s important to note that cryptocurrencies function as bearer assets, meaning that the individual who has control over the asset is its rightful owner. In essence, if you were to lose your Bitcoin/ Ethereum or if it were stolen, there are no recourse options to recover the funds, unlike a bank account or credit card, where a bank can reverse a transaction.

Many retail investors typically store their Bitcoin on exchanges or in hot wallets, which unfortunately have a history of security breaches. This approach may not be suitable for professional investors. Some savvy retail investors opt for hardware wallets, which allow the secure offline storage of Bitcoin private keys, providing a significantly higher level of security compared to exchanges.

However, from the perspective of institutional investors, relying on a single USB hardware device still presents certain risks, such as the potential for an employee to abscond with the hardware wallet containing all the funds. In this context, a more robust strategy involves separating authority to prevent any individual from acting in a rogue manner.

The cryptocurrency and digital asset custody industry is evolving rapidly, but it remains relatively immature and inexperienced compared to traditional finance. To encourage major financial institutions to consider investments in Bitcoin, the custody aspect needs to be addressed comprehensively. In addition to digital asset custody solutions, investors also require insurance products that safeguard Bitcoin and other cryptocurrencies against theft.

 

Challenges in setting secure custody wallet operations for institutions.

Experienced investors require compliant cold storage wallet solutions and insurance coverage from well-established, reputable companies. While numerous native crypto custody options exist, they may not fully satisfy the requirements of the largest financial players.

While most digital asset custody services have garnered success within their scope, they primarily cater to smaller, forward-thinking capital allocators. Nevertheless, most major institutional players have yet to fully engage in this arena.

Encouragingly, prominent financial institutions have started venturing into the digital asset custody services domain. For example, Fidelity introduced its institutional custody solution in mid-2019. It remains too early to ascertain the full impact on the market, but the involvement of a traditional financial institution in the custody of Bitcoin represents a promising development.

 

FAQ

What is the main reason why blockchain is very popular in the financial sector?

Blockchain technology has streamlined the error-handling and reconciliation processes for banks, enabling faster transaction tracing and more timely error identification. This empowers them to detect and rectify errors prior to transaction completion.

How can blockchain change the banking industry?

Blockchain technology has revolutionized the banking and financial services sector by eliminating the requirement for intermediaries in the lending and credit industry. It has enhanced the security of borrowing money and facilitated the provision of lower interest rates. Additionally, blockchain has transformed trade finance by replacing cumbersome paper-based processes.

How does the impact of the blockchain go beyond financial services?

Within the world of blockchain, trust is not reliant on influential intermediaries such as banks, governments, or technology corporations. Instead, it is established through widespread collaboration and sophisticated code. Blockchains are a guarantor of integrity and trust even among individuals who are unfamiliar with each other, making it considerably challenging to engage in dishonest practices.

What is the impact of blockchain technology on accounting and finance?

Blockchain technology has the potential to optimize numerous labor-intensive and time-consuming procedures within financial transactions. Specifically, it can automate the recording and reconciliation of transactions, diminishing the necessity for human involvement and potentially eradicating errors or discrepancies.

What is the importance of Blockchain technology to financial reporting?

Blockchain technology offers an unalterable and distributed ledger system, ensuring transparency and security in transactions. In the field of accounting, this implies that each financial transaction can be documented on the blockchain, establishing a clear and auditable data trail.

What is the impact of Fintech and blockchain technologies on banking and financial services?

The incorporation of blockchain and digital asset wallet technology in banking holds the potential to enhance transparency and efficiency by diminishing the requirement for intermediaries like clearinghouses, auditors, and reconciliation agents. This shift would lead to quicker and more cost-effective transactions.

More on Crypto

Digital Asset markets have taken a giant leap ever since their categorization from purely being a volatile alternate investment asset to now being a robust and regulated asset class. 

The journey of digital assets, most significantly that of blue-chip tokens like Bitcoin and Ethereum, has been nothing short of a protagonist in the fight against traditional financial systems, investment avenues, and age-old yield mechanisms. 

However, it was only after the introduction of regulation for these digital assets that they garnered huge institutional interest, pushing the scale of adoption and inviting the likes of family offices to partake in the “coming of age” story of investing in digital assets. 

In the underlying characterization of digital assets as the next best portfolio addition for institutional investors, with a significant boost kicking in after the launch of Bitcoin ETFs(with Ethereum ETFs also on their way), there are still reservations as to how to go about tackling the security, custody, and management challenges that come with them. 

To discuss how current market conditions are driving family offices to embrace portfolio diversification strategies that include allocating funds to digital assets, we dive deep into the intricacies of digital asset custody

Challenges In Secure Digital Asset Investing For Family Offices 

Family offices, traditionally known for their conservative investing approach, sit in the middle of the institutional investors’ branch, bringing untapped liquidity into the market. Conventionally, family offices used to rely only on safer investment bets to accrue value for their investments, but now they are increasingly dipping their toes into the dynamic world of digital assets. 

Despite the potential for high returns, family offices have historically faced significant challenges when considering digital assets as an investment class. Factors such as market volatility, regulatory uncertainty, and the need for established custody solutions have deterred many from fully embracing digital assets.

Talking about the key hurdles family offices face in navigating this exciting but complex landscape, here are some top-of-the-line challenges for them:

  1. Security Concerns: The nascent nature of digital assets presents unique security risks. Hacking, scams, and volatile markets can threaten portfolio stability. Family offices need robust custody solutions, advanced cybersecurity measures, and comprehensive risk management strategies to mitigate these threats.
  2. Regulatory Uncertainty: The regulatory landscape surrounding digital assets is still evolving, creating uncertainty and compliance hurdles. Family offices must stay updated on changing regulations and navigate complex compliance requirements across jurisdictions.
  3. Limited Expertise: Building internal expertise in digital assets can be time-consuming and expensive. Family offices often need more in-house knowledge and resources to properly evaluate, manage, and secure their digital asset investments.
  4. Lack of Infrastructure: Integrating digital assets into existing portfolio management systems can take time and effort. Family offices need secure and reliable infrastructure to seamlessly store, manage, track, and report on their digital asset holdings.
  5. Complex Valuation: Accurately valuing digital assets can be difficult due to their volatility and lack of standardized methodologies. Family offices need robust valuation frameworks and access to reliable market data to make informed investment decisions.

Enabling Family Offices to overcome challenges in digital asset custody

The promise of digital assets is undeniable, yet the hurdles for family offices can seem daunting. 

Overcoming the challenges mentioned above and finding the best probable solutions for them becomes a hardcore reality that must be dealt with utmost precision. 

At Liminal, we work extensively with institutions looking to go one step beyond simply investing in digital assets and look to operate them securely under all circumstances. The same logic applies to family offices as well. 

In our pursuit of building such a robust infrastructure solution, tailored to address the challenges faced by family offices fully and to empower them in their journey to moving to a new asset class for investment, we have created a comprehensive custody solution, integrated best-in-class security protocols and provide real-time monitoring and risk management services to proactively identify and mitigate potential threats, giving family offices peace of mind knowing their assets are secure.

  1. Security Concerns:

Fortress-grade custody: We leverage multi-sig and MPC wallets, leading asset-to-insurance ratios, and bank-grade security protocols to ensure the safety of your assets. Our CCSS Level-3 certification and FIPS-compliant hardware devices go the extra mile, minimizing security risks and providing unmatched peace of mind.

Advanced Cybersecurity Measures: Our vigilant team constantly employs 24/7 SOC monitoring, strict access controls, and penetration testing to identify and mitigate potential threats.

Comprehensive Risk Management: Our experts help you create and implement tailored risk management strategies, considering internal vulnerabilities, market fluctuations, and evolving threats.

  1. Regulatory Uncertainty:

Staying Ahead of the Curve: We have a dedicated team of compliance experts who stay abreast of evolving regulations worldwide. We integrate crucial compliance monitoring in our solutions such as KYC/KYB, AML, and Travel Rule checks, to help navigate complexities across jurisdictions and proactively adapt our services to ensure your portfolio remains compliant.

Streamlined Reporting: Our platform generates comprehensive compliance reports automatically, saving you time and resources while ensuring transparency and regulatory adherence.

Regulatory Partnerships: We actively engage with regulatory bodies and industry leaders 

to become accredited custodians. Currently, we hold a TCSP license in Hong Kong and have also received an IPA from ADGM for an FSP license for our Abu Dhabi entity. 

  1. Limited Expertise:

Your Digital Asset Knowledge Hub: Our team of seasoned custody, compliance, wallet, and security professionals offers expert guidance on evaluating, managing, and securing your digital asset investments. We share industry insights, educational resources, and ongoing support to enhance your knowledge base.

Dedicated Account Management: A dedicated account manager serves as your point of contact, providing personalized guidance and support tailored to your specific needs and goals.

Extensive Resource Library: Access easy onboarding docs, a curated developer section, seamless user-guiding workflow, and trending topic discussions through webinars, research whitepapers, and market reports to build your understanding of digital assets and make informed investment decisions.

  1. Lack of Infrastructure:

Seamless Integration: Our API library, Liminal Express, seamlessly integrates with your existing portfolio management systems, creating a smooth and efficient workflow for managing your digital assets.

Secure Storage and Management: We provide institutional-grade hot and cold wallets for self and managed custody infrastructure, eliminating the need to build or manage complex systems.

Automated Workflows: Streamline recurring tasks and automate key processes with our automation engine, with powerful functionalities like smart refill wallet, smart consolidation, and auto-sweep, enhancing efficiency and reducing operational burdens.

  1. Complex Valuation:

Reliable Data and Valuation Tools: We offer access to trusted market data providers and valuation tools tailored for digital assets, enabling you to make informed investment decisions based on accurate assessments.

Insurance-as-a-Service: We have collaborated with Costero brokers to provide the best possible insurance to our clients that covers their entire portfolio at the best market price. 

Asset segregation and transparency: We deploy segregated accounts, succession planning, and no rehypothecation of assets to allow family offices to maximize transparency and access. 

Embracing the Future Of Family Office Investing 

The future of wealth management includes digital assets. Family offices are actively exploring this burgeoning space, recognizing the potential for diversification and growth. Liminal Custody stands as your trusted partner in this journey. As a regulated custodian, we offer best-in-class security, industry-leading compliance solutions, and a dedicated team of experts, empowering you to invest in digital assets confidently.

Let Liminal Custody guide you through the process, making the path towards secure and compliant digital asset investment smooth and efficient. Contact us today and explore the new frontier of wealth management

Remember, while the potential is promising, navigating the digital asset landscape requires careful planning and collaboration with trusted partners. Liminal Custody is here to equip you with the knowledge and resources to succeed.

February 23, 2024

As we continue constructing a fully regulated digital asset custody platform, ensuring secure storage for both crypto and fiat assets remains a critical priority. 

To facilitate the last checkpoint of enabling institutions to convert their digital asset treasury into fiat currency, we’re expanding beyond pure wallet infrastructure and integrating seamless fiat off-ramp capabilities for our partners.

We’re thrilled to announce our partnership with Encryptus, licensed and compliant off-ramp solutions tailored for institutional clients. This collaboration elevates Liminal’s service offerings by empowering our partners to convert their digital asset treasuries into fiat currencies efficiently.

Integrating A Seamless Off-Ramp Solution

The digital asset ecosystem historically faced friction points when transitioning between fiat and cryptocurrencies. Off-ramp solutions address this pain point by enabling efficient and streamlined conversion between asset classes, minimising value loss and simplifying compliance processes.

Here’s how off-ramp changes the game:

  • Reduced Friction: Frictionless conversion minimises delays and operational complexities associated with traditional fiat-crypto exchange methods.
  • Enhanced Efficiency: Streamlined workflows expedite asset conversion, increasing speed and cost-effectiveness for institutional and individual users.
  • Optimised Value Preservation: Advanced off-ramp solutions prioritise minimising price slippage and value loss during conversion, protecting user portfolios.
  • Simplified Compliance: Integrated compliance features navigate regulatory complexities, ensuring adherence to relevant financial regulations.

With our partnership with Encryptus, we have embedded their institutional-grade APIs, connecting their off-ramp solution within Liminal’s wallet and custody platform. 

This integration simplifies our clients’ liquidation requirements while keeping their assets secure and more:

  • Effortless Digital Asset to Fiat Conversion: Our partners will be able to access treasury management and facilitate business payments in 54 countries and individual payments in an extensive network of 80+ countries.
  • Streamlined Compliance and Regulation: Our partners will be able to leverage Encryptus’s rigorous licensing and compliance framework, ensuring adherence to stringent financial regulations.
  • Enhanced Platform Value: We will be able to expand the functionality of the Liminal custody solution, attracting institutional users seeking comprehensive digital asset management capabilities.

Moving Towards A Robust Off-Ramp Partnership With Encryptus

The partnership between Liminal and Encryptus earmarks a significant step forward in secure digital asset custody, representing a shared commitment to pushing compliant practices while supplying institutions with easy access to convert their digital assets to fiat. 

For Encryptus, the opportunity to integrate with Liminal’s established platform presents a chance to reach a wider audience and scale their innovative off-ramp solutions to new heights. By streamlining fiat conversion within Liminal’s secure custody infrastructure, Encryptus gains access to a trusted network of institutional users seeking seamless and compliant treasury management.

For Liminal, this collaboration reinforces our dedication to partnering with companies that demonstrably prioritise clear governance and robust policy frameworks. By aligning with Encryptus’s stringent compliance standards, we reaffirm our commitment to building a secure and sustainable future for digital assets, where trust and regulatory certainty go hand-in-hand.

January 22, 2024

Hello world, it’s that time of the month when we share the biggest security breaches in the world of Web3 through our Security and Regulatory Newsletter. 

Liminal believes in optimizing security and custody practices globally across the Web3 industry. Through our Newsletter, we highlight security, regulations, and compliance incidents that have happened in the past month and how one can follow better Security practices to safeguard their digital assets. 

We will also highlight regulatory changes that might have happened globally, which were significant to the overall ecosystem.

Dive in and get a detailed analysis of everything security and regulation in the domain of web3 with Liminal’s Monthly Security and Regulatory Newsletter.

Web3 Security Compromises in January

Abracadabra exploited for almost $6.5 million, Magic Internet Money stablecoin depegs

The Magic Internet Money ($MIM) stablecoin has lost its dollar peg again, dipping all the way below $0.77 in a flash crash before returning to around $0.95.

The depeg appears to be related to an exploit of the Abracadabra lending protocol, which allows people to borrow $MIM. An attacker exploited an apparent flaw in the platform’s smart contracts to drain around $6.5 million.

Goledo Finance hacked for $1.7 million

Goledo Finance, an Aave-based lending protocol, was exploited through a flash loan attack. The attacker stole assets estimated by CertiK to be around $1.7 million.

Goledo Finance contacted the attacker to offer a 10% “bounty” for the return of the remaining assets. In a message on January 29, the attacker wrote: “I hacked Goledo and want to negotiate.”

Socket service and its Bungee bridge suffer $3.3 million theft

The Socket cross-chain infrastructure protocol was hacked for around $3.3 million in an attack that exploited its Bungee bridge. The thieves were able to exploit a bug that allowed them to take assets from those who had approved a portion of the system called SocketGateway.

A little over 700 victims were affected, and the highest loss from a single wallet was around $657,000. 121 wallets lost assets priced at more than $10,000.

On January 23, the protocol announced they had recovered 1,032 ETH (~$2.23 million) of the stolen funds.

Web3 Regulatory Practices for January

The EU Imposes Stricter Due Diligence Rules for Crypto Firms

On Jan. 17, the European Council and the Parliament came to a provisional agreement on parts of the Anti-Money Laundering Regulation (AMLR) that now extends to the crypto sector.

Under the new rules, cryptocurrency firms will be required to run due diligence on their customers involving a transaction amounting to €1,000 ($1,090) or more. 

However, the agreement isn’t final yet as it has to be first officially adopted by the Council and Parliament before the rules can be applied.

So, after the EU passed its landmark MiCA regulation last year, which clarified rules about cryptocurrencies, regulators are now targeting the space with tighter controls. 

While these regulations bolster security and trust in the crypto market, potentially attracting more cautious investors and combating financial crimes, they also present challenges. 

The US State of Virginia Introduces Digital Assets Mining Rights

Recently, the Virginia State Senate introduced Bill No. 339, which outlines regulations for the transactions and mining of digital assets and their treatment under tax laws. 

The legislation exempts individuals and businesses engaged in crypto mining activities from obtaining money transmitter licenses. Additionally, it protects miners from any discrimination. 

Issuers and sellers of crypto are also exempted from securities registration requirements if certain conditions are met. Moreover, those offering mining or staking services are not to be classified as “financial investment” but must file a notice to qualify for the exemption.

The bill further incentivizes crypto’s use for everyday transactions by offering tax benefits. Under this, up to $200 per transaction can be excluded from an individual’s net capital gains or gains derived from using crypto to purchase goods or services, starting from Jan. 1, 2024.

Key Takeaways:

  • Hackers continue to exploit vulnerabilities in DeFi protocols and cross-chain bridges, highlighting the need for robust security measures.
  • Regulatory frameworks are evolving rapidly, with stricter AML rules and supportive legislation for emerging technologies like crypto mining.
  • Staying informed about these developments is crucial for navigating the digital assets market safely and responsibly.

Stay #LiminalSecure

These events highlight the constant evolution of Web3 security and regulation. You can confidently navigate this dynamic landscape by staying informed and prioritizing security best practices. 

At Liminal, we’re committed to empowering institutions to unlock the full potential of digital assets without compromising security or compliance norms with our robust custody and wallet infrastructure solutions. Join us on this journey towards a safer, more accessible future for digital assets.

January 15, 2024

Find Out How You Can Benefit From A Fully Self-Custodial Wallet Architecture