Institutional participation in digital assets has accelerated significantly. The launch of spot Bitcoin ETFs in the United States attracted tens of billions of dollars in inflows within months, with BlackRock’s iShares Bitcoin Trust becoming one of the fastest-growing ETFs on record. At the same time, major asset managers, corporates, and financial institutions are exploring tokenisation and blockchain-based settlements. The direction is clear: digital assets are entering mainstream financial architecture.
However, institutional adoption requires operational assurance, auditability, and clear risk transfer mechanisms. Large allocators cannot rely on reputation or technical claims alone. They need evidence that custody environments can withstand operational, governance, and internal-control failures — and that if a failure does occur, losses can be mitigated and compensated.
Custody insurance performs this role. It converts complex operational risk into an insurable exposure that can be priced, monitored, and financially protected.
The Loss Profile Demonstrates the Need
Despite improved infrastructure, operational loss events remain significant. Industry analysts estimates that more than $2 billion in digital assets were stolen each year over the past three years, largely due to breaches of custodial systems, key-compromise events, and process failures rather than protocol-level exploits.
These are the exact types of low-frequency, high-severity risks that insurance markets can specialise in underwriting. They are not speculative market movements — they are identifiable, preventable operational failures.
Institutional Standards Have Precedent
Traditional custody is one of the most mature financial services industries. Global custodian banks collectively safeguard more than $234 trillion in assets. This model is built on demonstrable operational integrity, auditable control frameworks, and the presence of financial backstops, including insurance.
As Citi noted in a 2023 research report on digital-asset infrastructure:
“The tokenization of financial and real-world assets could grow to between $4 trillion and $5 trillion by 2030.”
Such forecasts imply the need for custody environments that meet the same institutional expectations that apply in traditional finance.
Regulation Is Converging Toward Operational Proof
Regulators are increasingly focused on how digital-asset custody is conducted rather than simply who is providing it. Safeguarding controls, segregation of client assets, governance of signing authority, recovery planning, and internal auditability are becoming core regulatory requirements.
The documentation required to evidence these controls aligns directly with what insurers request during underwriting. Insurance is therefore not only a risk-transfer mechanism; it is also a signal of operational maturity.
The Strategic Role of Custody Insurance
For institutional allocators, custody insurance:
Supports fiduciary and governance requirements
Converts technical security into financial assurance
Reduces the perceived downside of operational failure
Enables scale by making risk quantifiable and transferable
A lack of custody insurance does not signal confidence — it signals unmeasured and unpriced exposure. For institutions managing client capital, that is rarely acceptable.
What This Means for CoreLedger
CoreLedger is working to establish the underwriting logic, risk standards, and assessment frameworks that allow insurance capacity to enter the digital-asset custody market responsibly. The aim is not to insure market volatility or speculation, but to underwrite the operational layer required for digital assets to be safely held, transferred, and maintained.
Institutional adoption depends on trust that custody infrastructure is robust and recoverable. Custody insurance is the mechanism that makes that trust possible.