A cold storage requirement mandates storing digital assets offline to protect them from internet-based threats. This security measure involves moving cryptocurrency private keys or entire asset holdings to devices or mediums that are not connected to the internet, such as hardware wallets or paper wallets. By isolating assets from online networks, the risk of cyber theft, hacking, and malware attacks is significantly reduced. It is considered a best practice for securing substantial digital asset holdings.
Context
Implementing stringent cold storage requirements is a key element of risk management for cryptocurrency exchanges, custodians, and institutional investors. Regulatory bodies often impose specific guidelines for cold storage to safeguard client funds and ensure operational resilience. The continuous improvement of cold storage technologies and protocols remains a priority for enhancing digital asset security.
The new law legalizes virtual asset operations while imposing a highly centralized regulatory architecture that grants the Central Bank ultimate control over market activity and asset issuance.
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