Chards can arrange custody of your cryptoassets via our network of selected partners who are all UK-domiciled and on the full register of FCA cryptoasset businesses.
Whilst assets are in custody you can take advantage of insurance cover for the full balance having peace of mind that any loss, damage or theft of private keys is covered. For many, the technical requirements of maintaining a software or hardware wallet are a hurdle to safe custody, with many leaving balances in "hot wallets" on exchanges. Our offering seeks to remove this barrier to secure cryptoasset storage and allows others with large balances to spread risk across personal hardware wallets and institutional grade custody.
Customers can store Bitcoin, Ethereum and a range of erc-20 tokens with full insurance cover. We can even custody erc-721 and erc-1155 NFT's upon request but please note the insurance currently does not cover these assets.
Please note this service is currently in beta testing and we invite customers to use the service whilst we optimise customer experience before full launch.
How Does Our Custody Service Work?
Our custody offering was born through our crypto payments service. We custom built a checkout gateway to allow customers to spend any value, in multiple cryptocurrencies and needed a custodian to store these assets whilst we got round to selling them or buying metals ourselves. It became clear that we could arrange the same custody service for our customers to save them the time of screening suitable companies as we are very satisfied with our arrangement.
Customers must first understand that crypto custody is an FCA regulated activity and as such Chards are not licensed to hold assets on your behalf. This is not a reflection on Chards or our internal processes but rather the complexity of the blockchain and the risk of lost funds through accident or malicious activity. Rightly so, the FCA require companies to be approved, and all of our partners are on the full register of crypto asset businesses.
The following steps briefly outline the process to using the custody service:
- Customers are required to have a Chards account and then apply for the crypto tier by emailing [email protected].
- Our staff will process your request and, in the process, take suitable identification and ask a few necessary questions.
- Following a successful 'know your customer' (KYC) process, we can create a wallet address for your Chards account. This wallet is dedicated solely to you and all your funds are kept segregated in the same way as any metal in our vaulted storage offerings.
- Once the wallet address is generated, terms of storage can be agreed, and we will invite you to transfer a small initial balance so we can check receipt. Following a successful transfer, the rest of the balance can then be transferred.
- All balances held in custody are fully insured, can be used for payment against precious metals and/or transferred back to you at any future date.
Please note there are no lower or upper limits for our offering although for very large balances we may have to create a custom insurance policy, and this can be arranged via [email protected]. Our customer service team will advise you if this is the case.
Institutional Grade Custody
We have handpicked our institutional partners with care ensuring that their service offering and insurance is to our standards whilst maintaining the position that we only want to deal with UK-domiciled companies who are on the full FCA register of cryptoasset businesses. The risk assessment process involved an insurance element which we concluded is on par with our vaulted bullion service. It is worthy to note that insured custody of cryptoassets is hard to come by and is testament to the technical elements and high-grade backend security of these systems. The next major decisions were ease of use, integration with our website and the ability to segregate customer funds from other customers and/or our own balances.
As of today any cryptoassets in custody can also be used in defi protocols and staking services. This is a custom option and can be arranged via email on [email protected].
In time, customers will be able to view their balance in the Chards customer account area, and for assets in custody, customers can take advantage of deals when they come to buy precious metals with us.
Crypto Custody Costs
We have kept our fee structure similar to our vaulted bullion service in that we charge a 1% (+VAT) fee on any balances using a simple average of the crypto price each month. Please note there is a minimum charge of £50 (+VAT) per month.
Are Crypto Custody Services Different from Wallets?
Custodians are a very different concept to the wallet you have self-custody over and the policies, training and technology to keep digital assets safe are simply staggering. They are organisations who specialise in the custody of digital assets for banks, hedge funds and enterprise and are comfortable holding millions of pounds worth of assets. Their systems are bank-grade, keeping data encrypted even from their own staff and for those who are approved by the FCA, customers can have confidence that the executive team have the professional experience to deliver such services.
Many custodians use a combination of hot and cold wallets and multiple layers of security to keep private keys and assets safe. These layers involve keeping private keys on encrypted servers, behind facial recognition software on phones and even requirements of multi-signature (multiple private key confirmations) to move assets between addresses or approve policy changes.
Risks of Exchange Hot Wallets
A hot wallet is one where the private keys are 'connected' to the internet whereas a cold wallet has a physical barrier and remain offline unless funds need to be accessed or transmitted. We understand a lot of customers hold balances on 'reputable' exchanges although it is worth noting that these balances are firstly not insured, likely used to fund the wider business operations (think lending for margin traders or staking) and at worst are simply made up. The latter explains some of the multi-day delays some users of dubious exchanges are subject to whilst the exchange scrambles to liquidate to settle the withdrawal balance.
These 'hot' wallets as they are known also come at the expense of you handing over your assets to companies and executives who reside outside of the UK and sometimes nowhere at all! The details of some exchanges are opaque to say the least especially in regard to their legal jurisdiction and/or their place of domicile....
Our service offering allows you to deposit your assets with confidence knowing you have the support of a long-standing coin and bullion dealer and our FCA approved network of selected partners.
Software Wallets Vs Cold Wallets Vs Paper Wallets
The wallet investors choose to use will depend upon ease of use, balances and risk appetite. Both software and hardware wallets introduce a third-party risk as customers must trust the software developers whilst paper wallets kept offline run the risk of being lost!
Many software wallets are suitable for small balances and the good ones will store private keys in secure enclaves within the operating system, yet they are not without risk. As software wallets can be linked to defi protocols and NFT airdrops (and so on) they run the risk of user error where access to private keys is given for an exploit to take place. There is a plethora of examples on the internet for those interested in reading more.
Cold wallets are physical devices (think a USB stick) such as a ledger or Trezor hardware wallet and these are the most popular means to store larger balances for investors who opt for self-custody. These are not without technical difficulties or risk as customers have to be comfortable keeping the firmware up-to-date and ensuring they are using the legitimate version of the software. It is common for scammers to impersonate software resulting in a loss of net worth for those unfortunate enough. The main risk with a hardware wallet is losing access to the assets either through loss or damage and subsequent loss of the private key (seed phrase) used as the last line of recovery. Again, those interested can learn more from a google search as it is estimated somewhere in the region of 20% of all Bitcoin is permanently lost on the network.
Paper wallets are for those users who wish to avoid third-party risk and keep the seed phrase offline and in writing. In the old days of Bitcoin this was the only option and could explain why so many assets are lost on the network! That being said, it is likely the most secure option if you can trust yourself not to lose it!
In summary, investors must decide on a risk-based approach between ease of use and security and whether they trust themselves with the responsibility of storage. At the end of the day, there is no helpline to call if you make an error and lose access. Your assets are gone for good!