Cryptobanking, privacy, and risk: CDG poised to reshape the custody landscape

At Custody Digital Group, we believe that the role of a digital asset custodian is central to a sea change occurring in global finance, all made possible through the immutable and permissionless infrastructure of cryptocurrency networks. To us, Bitcoin and Ethereum are not just currencies. At CDG, we view these networks instead as a new kind of bank: the cryptobank.

The popular refrain of “be your own bank” is steeped in cypherpunk tradition, a declaration that individuals have a right to vigorously defend their personal privacy and property, and that this defense increasingly relies on code. The reality is that being your own bank carries significant operational risk when multiple assets, multiple parties, and layered financial controls are required to transact with digital financial tools and networks between businesses and individuals. In our view, the emerging objective of a crypto custodian is to help manage that risk while preserving your rights.

We are not ourselves a bank, but we can help you safely utilize these powerful new banks, the cryptobanks, to create your own globally accessible, real-time financial infrastructure using digital assets. Instead of just merely being your own bank, CDG is building a custody platform that empowers your business or organization to “be your own conglomerate bank”.

Another oft-heard phrase among cryptocurrency advocates is “not your keys, not your coins”. We hold great respect for this attitude and have ourselves a deep conviction that individual ownership and control of one’s personal property is an unequivocal natural right. The market has numerous options for secure self-custody of your digital assets and we are not here to discourage your use of them. However, as an organization’s use cases for digital finance grows to include multitudes of decision makers, co-signers, asset types, and legal responsibilities to other parties, we have an extension to this basic idea: “Not your controls, not your accounts.”

Executive duty in our newfound digital financial age is explicitly dependent on software. In the context of a digital asset custodian, we define Account Governance as the management of granular per-asset controls, clear identification of organizational actors, the incorporation and authentication of automated software based agents, and detailed policy for how actors and agents may initiate and cooperatively authorize transactions to conduct an organization’s financial affairs. This functionality is typically not served by self-custody solutions which are geared more for personal use. There are a number of transaction profiles that are better served by self-custody devices and software, but when use cases grow complex we provide solutions to manage risk while maximizing market opportunities.

As a crypto wallet is to an individual, digital asset custody is to small businesses, enterprise, institutions, and governments that seek to leverage cryptocurrencies, Central Bank Digital Currencies (CBDC), and the wider realm of digital assets as an integral component of their financial operations and investments. This is to be achieved ultimately by integrating software into business processes and accounting systems that can transact natively with cryptocurrency and digital asset networks while upholding the integrity of the Account Governance model at each step of the way.

In this spirit, we assert the following manifesto that defines the convictions, values, and responsibilities of a digital asset custodian:

1. Cryptocurrency networks deliver provably honest, low-cost banking infrastructure that is fiercely resistant to malicious actors and authoritarian geopolitical will.
2. Native digital tokens are cryptocurrency. The global network of private computing infrastructure that hosts a publicly available ledger and its consensus algorithm is a new kind of autonomous bank: the cryptobank.
3. Our primary responsibility as a custodian is to protect the identity, privacy, accessibility, and integrity of our clients’ interests on one or more cryptobanks.
4. Cryptobanks represent an evolution of private property and private sector banking. The right to access a cryptobank should be preserved and respected accordingly with the same vigor as the protection of an individual’s natural right to private property.
5. We view our role as a digital asset custodian as an essential one in the evolution of the liberal economic tradition under the Rule of Law. We recognize the source of economic liberty through the sovereign laws of democratic nations that uphold the rights to private property and act themselves as custodians of the economic system of competition.
6. Custodians must provide a clear voice of guidance to governments engaged in the development of new regulatory controls. We should resist policy that would institute arbitrary rule by committee and reaffirm a need for clear and limited legislation that shows restraint from prematurely inhibiting the growth of new services, protects the rights and liberties of our clients, and stimulates fair competition in the market.
7. Custodians must preserve and protect their clients’ freedom to associate, the freedom to choose among opportunities, the freedom to choose one’s own tolerance for risk, and perhaps most importantly, to accept private responsibility for negative market outcomes.
8. Custodial data in our possession shall be restricted as much as is technically feasible by limiting our record keeping to the identification of internal controls, the expression of relationships between client managed interests among multiple networks, and the identities of internal actors that bear legal and fiscal duty over the governance of an account.
9. Our clients’ identities shall be protected with the strictest maintenance of integrity, confidentiality, and privacy possible in accordance with the applicable laws and regulations of our respective jurisdictions.
10. Every atomic action we perform on behalf of a client’s interests must be auditable by an external party without betraying the identity of the client.
11. We believe that the tokenization of rights, claims, and interests over private property is best served when custodied exclusively and natively with one or more cryptobanks.
12. Our deep respect for the immutable security and economic liberalism of cryptobanking shall serve as the anchor of our client’s trust in our financial services.

In summary, we believe that choosing a digital asset custodian to serve your financial welfare should represent a positive choice to participate in a new global economy that is transparent and accessible to everyone.

While business plans, products, and specific services may change over time as we navigate the fast moving pace of cryptocurrency and digital asset markets, our adherence to these principles shall not. We look forward to serving you in the future. Thank you for your time and please stay tuned to our blog for new crypto discussions and product announcements.

• Team CDG