Crypto Custody – An Empirical Assessment –

This paper provides, to our knowledge, the most comprehensive dataset on the terms and conditions (T&Cs) set by leading providers of crypto custody and wallet services.
Our sample 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 costly disputes, thereby lowering both information asymmetry and transaction costs.
Pt. II provides an overview of how crypto-assets are held in custody; Pt. III outlines our research sample; Pt. IV 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; Pt. V argues; Pt. VI concludes.