How Third-Party Digital Asset Custodial Wallets Integrate with Traditional Banks
Learn how to seamlessly integrate third-party digital asset wallets into traditional banking for secure crypto management.
The successful integration of digital asset custodial wallets into traditional financial systems is a challenge that many investment banks and other financial institutions are currently facing. But with the surge of client interest in cryptocurrencies, institutions are at a crucial turning point — they must either adapt and expand their services to include digital assets or risk being left behind.
While some institutions may have the resources to develop their own digital asset custody solutions, many lack the necessary staff with expertise in blockchain technology and digital asset management.
This is the gap that third-party wallet providers are designed to fill.
But the question remains: How do you effectively integrate these third-party wallets into your existing platforms? And what does this integration look like from a customer’s perspective?
In this blog post, we’ll explore how to seamlessly incorporate third-party wallets into your existing financial ecosystem, what this could mean for your customers, and how to find the right support for this process.
Why are custodial wallets needed to enable your customers to hold digital assets?
Custodial wallets are instrumental in the secure management of digital assets. By integrating these wallets, banks and other financial institutions empower their customers to handle digital assets right alongside traditional ones, streamlining the entire financial management experience.
But what sets custodial wallets apart? Essentially, custodial wallets act as protectors of your private keys, which are the vital pieces of data required to access your digital assets. Lose them, and your investments could be jeopardized or even fall prey to cyber theft. Custodial wallets shoulder the responsibility of protecting these keys, significantly reducing such risks.
Moreover, these wallets are built with an understanding of regulatory compliance, adding an extra layer of security for both banks and their customers. In this way, custodial wallets enable banks to offer a reliable, secure solution for digital asset management. This allows banks to provide a trustworthy, safe approach to managing digital assets, reinforcing their commitment to the protection of all client investments, digital or traditional.
How will your customers interact with digital asset custodial wallets?
You may be wondering: How will your customers engage with digital asset custody wallets? Will they be redirected to the third-party provider’s own website? Will the interface include their branding? Fear not.
A key strength of these wallets is their ability to integrate. Financial service firms can weave this technology, provided by third-party providers, right into their existing platforms.
For the customers of these firms, that means accessing their custody wallets through the firm’s existing website or app. This seamless integration enables customers to manage their digital assets alongside traditional investments, such as stocks and bonds, using a familiar interface and authentication methods.
Integrating these custodial wallets not only enables customers to manage digital assets as smoothly as traditional investments. It also equips the bank’s personnel, such as portfolio managers and risk management teams, with the ability to conduct transactions or supervise digital asset holdings on the customers’ behalf.
How white label solutions enhance your customer’s digital wallet experience
To help with providing your customers with a truly seamless experience, these providers often offer white label solutions, which can be finely tuned to meet your firm’s specific requirements, from regulatory compliance to user interface design and system integration.
This means your institution can integrate the custody wallet under your own brand umbrella, providing a consistent, familiar experience for your customers.
This not only assures a unified asset management experience but also enables your firm to uphold its unique brand identity while providing a secure, efficient digital asset management service.
How to implement third-party digital asset custodial wallets
So how does one go about implementing these third-party wallets? It’s not as simple as just buying the custodial wallet service. As mentioned earlier, the implementation process typically requires the integration of the provider’s services into your current platform. This process can be complex and may require the assistance of an outside resource.
The implementation process includes several steps, starting with choosing a reputable custodial wallet provider that meets your requirements, such as supported assets, security features, and regulatory compliance. Next, you establish a partnership with the provider to discuss the terms of the service, including fees, integration support, and any additional services you may require.
Upon establishing this partnership, the next phase involves crafting a detailed integration plan in collaboration with the custodial wallet provider. This strategic plan outlines the necessary steps, resources, and timelines for integrating their services into your platform.
The integration phase is a key part of the process. It entails API integration, UI/UX design, and thorough testing and quality assurance.
Depending on your organization’s resources and expertise, you may choose to utilize your in-house development team or work with a technology partner for this task.
We’ve been that partner
We had the privilege of assisting a leading American corporate investment banking services company, also one of the world’s largest custodian banks, in integrating digital asset custodial wallets into their financial ecosystem.
With increasing client demand for cryptocurrencies, the financial institution saw the necessity to include these digital assets in its custody services. Yet, this was not a simple task. The integration of cryptocurrencies like Bitcoin required a significant shift in the financial institution’s internal systems and processes, including the adoption of blockchain technology.
Faced with this challenge, the financial institution identified three essential factors for the new platform: security, scalability, and adaptability. To keep pace with market demands and competitors, the financial institution needed to bring it to market quickly.
Recognizing the need for expert assistance, the financial institution turned to us, given our extensive knowledge and experience in blockchain technologies. We developed a secure, scalable, and adaptable Web3 platform that not only integrated with their existing operations but also facilitated the transfer and withdrawal of crypto assets. It tracked balances, audited transactional information, and ensured rigorous KYC (Know Your Customer) compliance.
The result was a milestone in the industry: the launch of the first multi-asset platform bridging digital and traditional asset custody.
The new infrastructure provided a secure environment for transferring, safekeeping, and issuing digital assets, reinforcing the financial institution’s position as an innovative leader in the financial world.
Conclusion
As digital assets grow popular with investors, it’s time for banks to step up. They need to offer easy, safe access to these new types of investments.
Strategically partnering with third-party custodial wallet providers is an effective approach toward this end. By doing so, you not only expand your product portfolio, but you can also stay at the forefront of a swiftly changing financial landscape. This means you’re better positioned to serve your clients, while also promoting digital assets as a sound investment choice.
With thoughtful planning, the integration of these wallets could revolutionize your offerings. It empowers you to provide comprehensive, user-friendly, and secure financial services. Whether your customers trade in traditional or digital assets, or a blend of both, you’ll be equipped to meet all their needs.
What Relevantz can do for you
We help custodian banks and investment management firms build custom custody solutions with rich features and functions and integrations with existing systems while meeting stringent security and regulatory requirements.
Relevantz can also help you explore use cases of digital assets, tokenization, and blockchain that will fit your needs and the growing needs of your customers.
Want to include digital assets in your financial products?