Anchorage Digital CEO Highlights ‘Widespread’ Self-Custody Risks After Prime Trust Bankruptcy
Anchorage Digital CEO Diogo Mónica highlighted “widespread” risks posed by self-custody of digital assets after Prime Trust, a third-party “blockchain-native” custodian for assets such as USDC, PAX, and DAI, filed for Chapter 11 bankruptcy.
In an interview with The Block, Mónica stressed that full control of a wallet with a 12-word backup seed phrase can create “the illusion of security,” but in reality, it’s “very, very hard to achieve the same level of security as an enterprise-grade, highly regulated, licensed platform.”
He said there is no question about the fact that the digital asset industry needs custodians, but cautioned that “self-custody is not an appropriate solution” if users want to achieve the same level of security and compliance.
Mónica further noted that self-custody of a digital asset exposes one to numerous risks that are, for the most part, out of one’s control. These risks include cyberattacks, thefts, human error, natural disasters, and physical destruction of devices, he said.
He called for a “higher level” of awareness for these risks by entities tasked with the custody of digital assets, and by the digital asset users who employ them. This, he said, will go a long way in ensuring a certain level of security that is on par with traditional financial assets.