Definition ∞ Custody outsourcing involves an institution or individual delegating the responsibility of holding and managing their digital assets to a specialized third-party provider. This practice transfers the operational burden and security risks associated with private key management to an external entity. It allows asset owners to leverage professional security infrastructure and compliance expertise without direct involvement. The third-party custodian assumes control over the digital assets on behalf of the client.
Context ∞ Custody outsourcing is a critical and growing service in the institutional adoption of digital assets, addressing the complex security and regulatory requirements for large-scale crypto holdings. A key discussion point involves the due diligence required when selecting a custodian and managing the associated counterparty risks. Future regulatory guidance will likely establish clearer standards for outsourced custody arrangements, influencing service provider selection and operational resilience in the digital asset market.
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