Custodial Asset Risk is the potential for loss or unauthorized access to digital assets when they are held by a third-party service provider. This risk arises from the reliance on an external entity to secure private keys and manage funds. It includes possibilities such as platform hacks, operational failures, or insolvency of the custodian.
Context
Custodial asset risk is a significant consideration for investors using centralized exchanges or institutional custody solutions. The ongoing debate centers on balancing convenience with security, driving demand for robust regulatory frameworks and advanced security protocols to mitigate the dangers associated with delegating asset control.
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