Qualified Custodian

A qualified custodian is an institution — typically a bank, trust company, or registered broker-dealer — that meets specific regulatory requirements, such as maintaining client assets separately from the custodian's own assets, carrying appropriate insurance, and undergoing regular independent audits, qualifying it to hold client funds and securities on behalf of investment advisers, funds, or other regulated entities. Many jurisdictions' securities regulations require investment advisers managing client assets above a certain threshold to use a qualified custodian rather than holding client assets themselves.

In crypto specifically, the question of what constitutes adequate qualified custody for digital assets has been an active area of regulatory development, since traditional qualified-custodian rules were originally designed around securities and cash rather than cryptographic bearer assets controlled by private keys. A regulated crypto custodian seeking to serve institutional clients as a qualified custodian typically needs to demonstrate segregated custody (see Kaavon's "Segregated Custody" glossary definition) of client assets, robust key-management controls, and independent verification such as a SOC 2 Type II audit (see Kaavon's "SOC 2 Type II Audit" glossary definition).