Third Party Custody

Definition ∞ Third party custody involves entrusting assets to an independent institution for safekeeping and management on behalf of their owners. This arrangement provides enhanced security, operational efficiency, and often regulatory compliance. The custodian is responsible for protecting the assets from theft, loss, or unauthorized access. It separates asset ownership from asset control.
Context ∞ For institutional investors entering the digital asset space, third party custody solutions are critical for managing the security risks associated with cryptocurrencies and tokenized securities. Specialized digital asset custodians offer robust security measures, insurance, and regulatory compliance. News frequently reports on the development of these services, which are essential for increasing institutional participation and trust in the digital asset market.