External vs. internal crypto custody: What’s the best choice for banks, brokers and institutional organizations?

When entering the digital asset market, institutions face many questions – including whether they should develop a trading and custody infrastructure themselves or work with a licensed partner. This ‘build or buy’ challenge includes many different factors, from cost and security to time-to-market. We’ll show you why renowned financial institutions trust Boerse Stuttgart Digital, Europe’s leading modular one-stop shop for crypto trade and custody.

Having your own custody is often uneconomical

At first glance, the advantage of having maximum control over your own custody seems tempting. But the path to get there is very complex and resource-intensive. An example calculation shows that building their own crypto custody infrastructure is five to ten times more expensive for banks, brokers, asset managers and other companies than using external crypto custody.

There are various reasons for this:

• Capital and operating costs: Building a secure and scalable custody solution takes a great deal of capital, resources and time. Plus ongoing operating costs for specialised staff for 24/7 monitoring, security audits and physical security for cold-storage components.

• Regulatory hurdles: Many companies are able to develop the technology itself – but gaining a license for custody is often a significant additional hurdle. The legislation around MiCAR (Markets in Crypto-Assets Regulation) is a high barrier to entry. Boerse Stuttgart Digital is fully regulated and holds the first BaFin MiCAR license in Germany. Getting to that point took a lengthy process involving strict requirements for IT security, compliance and additional areas.

• Compliance burden: In addition to the license, crypto custody requires institutions to adhere to strict requirements for KYC (know your customers) and AML (anti-money-laundering), including blockchain forensics and implementation of the ToFR (Transfer of Funds Regulation, often called the Travel Rule). In the case of internal solutions this is a real cost driver, which also involves ongoing adjustments to new regulations.

• Time-to-market: The whole process, from design and build to final licensing by the supervisory authority, takes a long time. Banks, brokers and co. with their own solution will find it hard to enter the market swiftly – a strategic disadvantage compared to the competition who are already in the market or about to enter.

External crypto custody for institutional players

Outsourcing crypto custody to a specialised and licensed partner eliminates the hurdles and challenges named above in a strategic manner. Instead of putting scarce, costly resources into building a parallel infrastructure that doesn’t actually belong to their core business, banks, brokers and asset managers can outsource it and then concentrate fully on their business model and customer relationships.

Instead of hard-to-predict initial investment, you have operating costs you can plan. This makes entering the cryptocurrency and digital asset market more straightforward and easier to justify to internal stakeholders (and external backers).

In a market phase where demand is growing rapidly, it is especially important to enter the market quickly. In Germany, for example, the number of crypto-holders increased by nearly five to ten times 17 percent between 2023 and 2025. In Europe there are nearly 50 million ‘crypto owners’; worldwide there are over 560 million.

So the crucial benefit of outsourced custody (and optional brokerage solution, which Boerse Stuttgart Digital offers as a one-stop shop via a platform) lies in the accelerated time-to-market. Instead of undergoing a lengthy process to build a solution and get licensed, financial institutions can connect to an existing platform for simple, immediate market access.

At the same time, unlike internal solutions, external crypto custody removes the considerable compliance burden from internal resources. Instead of having to deal with complex legislation themselves, institutions working with Boerse Stuttgart Digital benefit from, for example, an existing MiCAR license, plus AML checks and adherence to the Travel Rule as a service. This guarantees maximum legal security.

Boerse Stuttgart Digital Custody: Reliable crypto infrastructure for your success

If you decide to outsource your crypto custody, Boerse Stuttgart Digital provides a solution for brokerage, exchange and custody as a one-stop shop. The custody of digital assets is based on multiple pillars that come together to form a state-of-the-art technology.

• Integrated platform: As an external solution, Boerse Stuttgart Digital Custody takes care of liquidity management, detailed bookkeeping, transaction management and blockchain forensics for AML checks.

• Segregated wallets: Our concept combines hot wallets, cold wallets (manual approval) and ice-cold wallets (fully air-gapped) for optimum liquidity and the highest level of asset protection.

• Extensive insurance protection: Crime insurance, underwritten by Munich Re and Zurich, covers all wallet types (hot, cold, ice-cold) against hacks and internal theft.

• Guaranteed compliance & bankruptcy remoteness: As the first German provider with a BaFin MiCAR license, we guarantee maximum legal security. In addition, an assessment confirms that your assets are legally protected in the event of insolvency and kept separate from our own.

Flexible models to suit every target group

Not every bank, broker and asset manager faces the same challenges. That’s why Boerse Stuttgart Digital’s custody solution provides various models to cover multiple use cases:

External custody of digital assets is a strategic accelerator

Although the ‘build or buy’ decision is partly a technical one for institutions, it is much more a matter of strategy. For most banks, brokers and asset managers, building their own crypto custody solution is too complex and often uneconomical, given the combined challenges of technology, regulation and security.

That’s why outsourcing to a specialised, licensed partner like Boerse Stuttgart Digital doesn’t just make technical sense. It also creates predictable costs and accelerates your market entry.

In our extensive white paper on our custody solution, you’ll find additional detailed information on the benefits of an external custody solution. We show you how the platform is structured technically and what security measures it offers you and your customers, from wallet structure and risk management to insurance solutions – allowing a secure start in the world of digital assets and cryptocurrencies.

We’ll be glad to advise you in a 1:1 chat and find out about your specific requirements. We look forward to hearing from you!