What’s the one element that could make or break trust in the future of finance?
At the IFW2025 session on "Mass Adoption of Digital Assets," industry pioneers from AllUnity GmbH, Cordial Systems, and Monerium delivered a resounding answer: custody.
Sebastian Higgs, Co-Founder & COO of Cordial Systems, put it briefly: "Custody is the foundational layer."
This article, the first in our series "The Pillars of Trust," goes into why banks and regulators are doubling down on on-premise custody solutions, moving away from "black box" providers, and why mastering custody is the critical first step before unlocking the potential of DeFi and staking.
Curious about what’s driving this shift? Let’s explore.
The Importance of Custody in Finance
At IFW2025, the consensus was that custody is the bedrock of financial stability and trust. Here’s why it matters more than ever:
Why Custody Matters
Custody ensures assets are securely held, managed, and accounted for, whether they’re traditional securities or digital tokens.
In a world of rising cyber threats and regulatory scrutiny, robust custody protects institutions and their clients from catastrophic losses.
It acts as a vault that safeguards the financial ecosystem—without it, everything crumbles.
The Role of Custody in Building Trust
Trust isn’t automatic; it’s earned through transparency and security.
Sveinn Valfells, Co-Founder & Chair of Monerium, emphasized at IFW2025 that "trust is the main [factor] out of 10" for mass adoption. Custody delivers this by providing accountability that reassures banks, regulators, and investors alike.
Banks and Regulators: Mandating On-Premise Solutions
The push for on-premise custody doesn't seem like a passing fad. Banks and regulators are aligning to prioritize control and compliance:
The Need for Control and Security
Banks are "very opinionated" about risk management, as Higgs noted.
On-premise custody solutions give them direct oversight of their IT infrastructure, keeping sensitive data and assets within their walls.
This hands-on approach is critical in an era where a single breach could derail an institution.
Regulatory Requirements and Compliance
Regulators are equally uncompromising. Higgs highlighted jurisdictions like Turkiye, where authorities mandate that data and infrastructure remain in-country.
Compliance isn’t optional. Higgs, added, "Trust is domain-specific," underscoring that every link in the custody chain must meet stringent standards.
Moving Away from "Black Box" Providers
The days of outsourcing custody to mysterious "black box" providers are fading. And here’s why this shift is accelerating:
The Risks of Outsourced Custody
Outsourcing introduces unacceptable vulnerabilities. If a third-party provider fails, banks still face the fallout—regulatory fines, incident reports, and eroded consumer trust. Higgs warned, "The outcome of risk materializing is far too big to simply accept a… black box provider." The stakes are too high for blind faith.
The Benefits of In-House Solutions
On-premise custody flips the script, empowering banks to own their security protocols and ensure compliance.
It’s like fortifying your own castle rather than renting someone else’s—every detail is under your control. This resilience is why industry leaders are rethinking their approach.
Custody as the First Step for DeFi and Staking?
Decentralized Finance (DeFi) and staking promise transformative opportunities, from decentralized lending to earning rewards on crypto holdings. Yet, Before assets can be deployed into DeFi protocols or staking pools, they must be securely custodied. Higgs stressed, "You need to get [custody] right before you can even start thinking about… other things which are potentially attractive business opportunities."
custody sets the stage for everything else.
Custody is the foundation of trust in the financial landscape as we see it evolve.
As banks and regulators demand on-premise solutions and shy away from "black box" risks, one truth emerges: getting custody right is non-negotiable.
For fintech visionaries, this is your starting point—master custody, and the possibilities of DeFi, staking, and beyond become attainable.
Events like IFW2025, where leaders like Higgs, Grosskopf, and Valfells share actionable insights, are where these strategies take shape.
Ready to stay ahead? Explore the rest of the articles around building trust in Web3 and join us at the next IFW to connect with the minds shaping finance’s future.
What’s your next step in building trust?
