Global Custody is a specialized financial service where a financial institution holds and administers financial assets for clients across multiple international markets and jurisdictions. This service extends beyond safekeeping to include transaction settlement, income collection, corporate action processing, and tax reclamation.
Mechanism
The operational architecture of global custody involves a sophisticated network of direct market memberships and sub-custodian relationships in various countries. For crypto assets, this includes securing private keys through advanced cryptographic techniques like multi-party computation (MPC) or hardware security modules (HSMs), and managing on-chain interactions across diverse blockchain protocols. It ensures secure and efficient asset transfer and management across a distributed ledger technology (DLT) environment.
Methodology
The strategic relevance of global custody for institutional crypto investing and trading centers on managing the complexities of cross-jurisdictional asset ownership, regulatory compliance, and operational security. It facilitates efficient capital deployment by addressing the technical and legal challenges of holding and transacting digital assets globally. Effective global custody provides the necessary infrastructure for institutional participation in RFQ crypto and options markets.
A broker-dealer gains approval for a foreign bank as a control location by demonstrating to the SEC, via a formal application and legal opinions, that the arrangement contractually insulates customer assets from third-party claims.
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