Security Token Custody: The Challenges and Opportunities

The global custody market is expected to reach $34.6 billion by 2023 and digital assets are becoming an increasingly large slice of the pie. Security tokens come with a unique set of requirements. While they’re intended to bring efficiency and automation to capital markets, digital asset custodians often face scalability and efficiency issues when handling them on public blockchains.

This guide dives deep into the challenges surrounding security token custody and how a purpose-built blockchain can overcome them.

by Polymath.


This guide explains how security token custody can evolve

More efficient investor onboarding

Most financial service providers comply with ID requirements through slow and often manual processes. Polymesh’s two-stage approach to ID verification allows for efficient onboarding as well as specific KYC checks.

Faster, more automated asset onboarding

Programming digital securities individually using smart contracts is laborious and time-consuming. Polymesh creates assets natively at the protocol layer, meaning custodians can onboards assets more efficiently.

Improved safekeeping and privacy

Most blockchains are built for use by individuals and don’t offer the level of security and privacy that institutions require. Polymesh helps institutions minimize external threats and maintain internal divisions of responsibility.

Streamlined asset servicing

Many custodians still process corporate actions manually, which is labour-intensive, error-prone, and risky. Polymesh automates the corporate actions lifecycle so that custodians can boost efficiency and cut errors and overhead.

Simplified approach to settlement

Issues with general-purpose blockchains are holding custodians back from the benefits of blockchain-based settlement. Polymesh provides a simplified approach to transfers that relies on efficient workflows and blockchain automation.

Increased network participation

With proof-of-work blockchains, rewards and participation in the chain’s direction are out of reach for most participants. Polymesh’s proof-of-stake consensus and on-chain governance allows custodians and their clients to engage in decision making and share in rewards.

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"At a certain point, it makes sense to create a purpose-built infrastructure, rather than try to continue to build on top of one intended for other uses."