Definition ∞ Custody regulation refers to rules and guidelines governing the secure holding and management of digital assets on behalf of others. These regulations stipulate requirements for entities that store cryptocurrencies or other digital assets for clients. They aim to protect client funds from theft, loss, or misuse. Compliance involves stringent security measures, operational controls, and often capital requirements for custodians.
Context ∞ Custody regulation is a critical component of institutional adoption for digital assets, as traditional financial firms require secure and compliant storage solutions. Regulators are developing specific rules for crypto custodians, recognizing the unique risks associated with digital asset storage. Debates often center on the technical standards for security, the scope of liability, and the need for clear guidelines to prevent market manipulation and protect investors.
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