The Pitfalls of Self-Custody: Prime Trust Failure Exposes Industry Risks
The CEO of Anchorage Digital, Diogo Monica, has highlighted the widespread risks that exist within the crypto industry, citing the failure of crypto custodian Prime Trust as an example. According to Monica, the problem at Prime Trust was not related to the technology they used for custody, but rather their lack of knowledge in utilizing it effectively. This integration failure proved fatal for a company whose mission centered around custody. Prime Trust found itself locked out of its own “cold storage” wallets, resulting in the loss of access to millions in deposited assets. The firm continued storing tokens in an old wallet instead of transferring them to a newer solution, rendering those assets unrecoverable. Monica emphasized the need for clear definitions of digital assets and the importance of qualified custodians to prevent such incidents.
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The failure of Prime Trust underscores the risks associated with self-custody in the crypto industry. It is crucial for companies to possess the technical knowledge and expertise to effectively use custody technology. Additionally, the industry must focus on establishing clear definitions for digital assets and promoting the involvement of qualified custodians. While regulations have begun addressing these concerns, more needs to be done to ensure the protection of client funds. By learning from incidents like the Prime Trust failure, the crypto industry can work towards building a more secure and reliable custody infrastructure.
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