Stablecoin Custody: A Strategic Priority for Banks
Rebeca Moen Nov 01, 2025 11:57
As stablecoins become integral to finance, banks must navigate custody challenges, balancing security, compliance, and operational efficiency, according to Paxos.
Stablecoins have rapidly emerged as a crucial component of the global financial landscape, with over $150 billion in average daily transfer volume across public blockchains. As digital dollars increasingly facilitate payments, settlements, and trading activities worldwide, banks face the critical question of how to safely offer stablecoin services, according to Paxos.
The core challenge lies in custody. Similar to their traditional role of safeguarding deposits and securities, banks must now devise strategies to securely manage stablecoins. The chosen custody model will impact their ability to manage risks, ensure compliance, and capitalize on digital finance opportunities.
Custody Is Critical for Stablecoins
Stablecoins differ from traditional deposits as they are bearer assets, meaning whoever holds the cryptographic keys controls the funds. This presents both technological and fiduciary responsibilities. Banks must store stablecoins while balancing security, regulatory compliance, and operational efficiency.
Strategic Considerations for Banks
Global regulatory bodies are establishing standards for digital asset custody. In the U.S., the OCC and SEC have issued guidance, while Europe's MiCA framework introduces requirements for safeguarding client digital assets. Singapore's MAS is also setting global best practices with its upcoming stablecoin framework. Banks must align their custody models with these regulations to build trust and avoid regulatory issues.
When choosing a custody model, banks have two primary options:
- Build Direct Custody: Developing in-house wallet infrastructure and controls.
- Leverage Third-Party Custody: Partnering with regulated trust companies or qualified custodians.
Many banks are expected to adopt a hybrid approach, maintaining direct custody for strategic purposes while utilizing regulated infrastructure providers like Paxos for scalability and risk management.
Institutional-grade custody requires robust wallet technology, such as multi-signature or multi-party computation, along with redundant systems and disaster recovery plans. Governance is also crucial, involving asset segregation, approval workflows, and independent audits. As the regulatory environment evolves, insurance coverage and capital buffers will become increasingly important.
The Strategic Opportunity
Effective custody is more than a compliance requirement; it is a competitive advantage. By providing reliable custody solutions for stablecoins, banks can offer faster and cheaper cross-border payments, give clients digital settlement options for securities and funds, and lay the groundwork for future tokenized deposits and assets. Custody serves as a gateway for banks to engage in and lead the digital transformation of financial markets.
Conclusion
Stablecoin custody is a strategic priority for banks, combining regulatory alignment, secure infrastructure, and trusted partnerships. Banks that move decisively will not only protect client assets but also position themselves at the forefront of financial innovation.
For more information, visit the Paxos website.
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