CustodyCrypto MarketRegulation

Custody After the Bill: Who Wins Between Banks, Exchanges, and New Entrants?

UUnknown

2026-02-17

10 min read

Post-2026 custody: which providers win — banks, exchanges, custodians or MPC entrants? Practical fee ranges, security models, and a due-diligence checklist.

Custody After the Bill: Who Wins Between Banks, Exchanges, and New Entrants?

Hook: Institutional investors, tax filers, and crypto traders are asking the same urgent question in 2026: with new federal rules finally arriving, who should hold your keys — big banks, exchanges, specialized custodians, or the emerging generation of MPC and wallet-as-a-service providers? The stakes are both operational and financial: custody choice affects counterparty risk, settlement speed, yield capture (staking/lending), and the fees you ultimately pay.

The context — why 2025–2026 changed the custody game

Late 2025 and early 2026 brought two major developments that re-shaped market incentives. First, the stablecoin federal framework enacted in 2025 clarified how dollar-pegged tokens interface with banking rails and deposit law. Second, in January 2026 U.S. senators unveiled draft legislation that would define when tokens are securities or commodities and give the CFTC expanded authority over spot markets. Together these moves removed a large chunk of legal ambiguity that had kept many traditional financial institutions on the sidelines.

“Legislative clarity in 2026 reduces regulatory risk and opens banking corridors for custody services — but it also raises the bar for compliance, reporting and capital backing.”

Result: banks are now positioned to compete at scale; crypto-native players must defend their product advantages; specialized custodians sit in the middle, partnering with banks and exchanges to deliver regulated infrastructure.

Market structure today: four custody archetypes

Understanding where fees and capabilities come from means starting with the provider archetype. Each has a distinct cost base, security model and regulatory obligations:

Commercial banks and bank-affiliated custodians — leverage charters, access to payment rails and deep compliance frameworks. Post-2025 stablecoin rules they can integrate custody with treasury and payments.
Crypto exchanges — high liquidity and integrated execution, often offer custody bundled with trading. They compete on speed, native token support and yield products.
Specialized custodians (crypto-native but custody-focused) — firms built to custody digital assets for institutions (threshold signatures, HSMs, insured vaults) and focus on auditability and B2B services.
New entrants: MPC providers, wallet-as-a-service, and hybrid models — software-first entrants offering multi-party computation, federated custody or tokenized vaults that enable self-custody semantics with institutional controls.

Regulatory barriers and implications for competition

Regulatory clarity reduces some barriers to entry but raises compliance costs.

Key regulatory shifts to watch (2026)

CFTC vs. SEC jurisdictional clarity: If spot markets fall under the CFTC, futures-style oversight and surveillance models become standard, favoring firms with market surveillance capabilities (exchanges and banks).
Stablecoin rules (2025): Banks have clearer pathways to custody-enabled payment services but also face constraints on paying interest on stablecoins, which affects yield products.
Custody licensing and bank partnerships: New custodian entrants must choose between obtaining a charter or partnering with banks — each path has cost/time trade-offs.

These shifts create a dual pressure: higher compliance costs (favoring large incumbents) and new revenue opportunities (favoring well-capitalized banks and agile specialized custodians).

Security models: technical differences that affect cost and risk

Security architecture is a major driver of fees and client requirements. Three dominant models exist in 2026:

1. Cold storage with HSM and air-gapped vaults

Traditional custodians and banks often favor hardware security modules (HSMs) combined with air-gapped cold storage. This model emphasizes absolute offline key custody, manual sign-off workflows and strong physical controls. Pros: well-understood, easier to insure. Cons: slower recovery and on-chain operations, higher per-transaction operational costs.

2. Multi-party computation (MPC) and threshold signatures

MPC splits signing across multiple servers or parties, enabling hot-wallet speed without a single key compromise. New entrants and specialized custodians use MPC to offer programmable custody, developer-friendly APIs and instant settlement. Pros: fast, resilient, integrates with DeFi. Cons: insurance markets still evolving; requires operational rigor to demonstrate equivalent offline security.

3. Hybrid models (software + hardware + custody tokens)

Hybrid designs combine HSM-backed key shares with MPC orchestration and tokenized vault receipts for reconciliation. These hybrids are emerging as the standard for institutions needing both speed and auditable custody.

Fee structures explained — what investors should expect in 2026

Custody fees are not one-size-fits-all. Below are the typical components and 2026 realistic ranges, with notes on negotiation levers.

Common fee components

Base custody fee (AUM-based): Percent of assets under custody charged annually.
Transaction fees: Per-withdrawal or per-transfer network fees, plus operator service fees.
Staking/validator fees: Share of rewards captured as commission (or reduced fee for stakers).
Onboarding, integration and platform fees: One-time or recurring for connectivity, dedicated support and custom SLAs.
Insurance premium pass-throughs: Some providers allocate insurance costs to clients or charge higher fees to maintain broad cover.
Minimums and account-level fees: Fixed monthly minimums for smaller institutional clients.

2026 benchmark ranges (illustrative)

Banks / bank-affiliated custodians: 0.05%–0.50% AUM annually for custody plus platform fees. Higher for active services. Banks price in compliance and capital costs.
Specialized custodians: 0.02%–0.20% AUM annually plus per-transaction fees ($25–$250) depending on asset and chain complexity.
Exchanges (custody bundled): Often zero explicit custody fee for retail; instead take trading fees and may charge withdrawal fees or leverage staking revenue share (~10%–25% of rewards).
MPC / wallet-as-a-service providers: Platform subscription + per-API call pricing; effectively lower for high-frequency needs but can include minimums ($5k–$50k annually for institutional packages).
Noncustodial / self-custody: No custody fee, but full operational cost on the client (hardware wallets, key management, insurance purchased separately).

Note: Large institutional clients with >$1B AUM can often negotiate fees down to basis points or win revenue-share arrangements with providers. Fee compression is accelerating as competition intensifies in 2026.

Competitive advantages — who wins and why

No single winner will dominate every market. The likely segmentation by 2026:

Banks — winning on trust and payment integration

Banks win clients who prioritize legal certainty, fiat integration and enterprise-level reporting. Their advantages:

Access to payment rails and on/off ramps
Regulatory capital & compliance frameworks
Client trust and enterprise-grade servicing

Trade-off: higher fees and slower product iteration. Banks will dominate custody for treasuries, corporate crypto holdings and clients who value balance-sheet integration.

Specialized custodians — winning on auditability and developer APIs

These providers edge out banks when the client values fast integration, cost-effective custody, and custody-native services like staking-as-a-service and cross-chain settlement. They will be the preferred option for funds, family offices and fintechs that need a mix of agility and institutional controls.

Exchanges — winning on liquidity and bundled services

For active traders and yield seekers, exchanges provide convenience and low explicit custody fees. But regulatory scrutiny and counterparty risk mean the most sophisticated institutions will demand segregation, proof-of-reserves and independent custody audits before relying solely on an exchange.

MPC and new entrants — winning on innovation and developer adoption

New entrants will win market share among platforms that need programmable vaults, self-custody UX and rapid on-chain operations. MPC opens the door to novel products (delegated signers, multi-entity governance) and will form the backbone of many hybrid custody offerings.

Actionable checklist: how to select a custodian in 2026

Use this checklist when evaluating custody partners. Score each item on a 1–5 scale and prioritize according to your mandate.

Regulatory status and licenses: Does the provider have a charter, bank partner, or money transmitter licenses in key jurisdictions?
Insurance coverage: Amount, scope (theft vs. operational loss), underwriter names and exclusions.
Security architecture: HSM, MPC, multi-sig? Third-party audits and penetration test history?
Proof-of-reserves & audit transparency: Frequency of snapshots, attestation vendor and public vs private reporting. See audit trail best practices for ideas on documentation and attestation hygiene.
Operational SLAs: Withdrawal windows, incident response times, disaster recovery plan and key recovery processes.
Interoperability & token support: Chains supported, bridge strategy and token onboarding cadence.
Staking and yield mechanics: Commission on rewards, lockup requirements and validator economics.
Fee model and negotiation terms: AUM rates, volume discounts, minimums and pass-through costs.
Independent custody option: Can assets be held in segregated accounts or third-party safekeeping independent of trading operations?
Governance & legal recourse: Jurisdiction, dispute resolution, bankruptcy protections and client rights on insolvency.

Case studies — short, practical examples

Case 1: A mid-sized hedge fund (AUM $250M)

Problem: wants low custody fees, staking revenue and fast chain support. Outcome: chooses specialized custodian offering 0.04% AUM + 15% staking commission, integrates via API, and negotiates reduced withdrawal fees. Rationale: better hashing performance and responsive support compared with banks.

Case 2: Corporate treasury (AUM $1B)

Problem: needs regulatory certainty and fiat liquidity. Outcome: selects a bank-affiliated custodian charging 0.12% AUM with integrated stablecoin treasury accounts. Rationale: ability to sweep stablecoins into insured bank deposits and consolidated reporting outweighed higher fees.

Problem: wants UX-first custody with user-recovery. Outcome: uses a wallet-as-a-service MPC provider on subscription pricing and shares revenue on transaction routing. Rationale: rapid deployment, developer-friendly SDKs, and lower TCO for millions of retail users.

Future predictions: how the competitive landscape evolves through 2028

Fee compression — competition and modular infrastructure will push base custody fees down; value will shift to bundled services (payments, tokenized securities, settlement).
Hybrid partnerships — expect more bank-specialized custodian alliances: banks provide trust and balance-sheet, specialists provide blockchain-native tech.
MPC mainstreaming — as insurance markets mature for MPC, it will become the default for high-throughput custody.
Regulatory fragmentation — cross-border custody will remain complex; global providers will need multi-jurisdictional licensing strategies.
Value migration — exchanges will retain retail flows and liquidity capture, but institutional custody income will increasingly go to banks and regulated custodians.

Practical takeaways for investors and treasuries

Match custody to your mandate: use banks for treasury and settlement needs; specialized custodians for fund operations; MPC for platform scale.
Negotiate beyond headline fees: push for fee caps, insurance clarity, and carve-outs for rare on-chain events.
Demand transparency: insist on proof-of-reserves, SOC 2/3 reports and independent attestations before signing.
Plan for portability: ensure clear asset recovery procedures and third-party escrow options in contracts.
Model net yields: include custody fees, staking commissions and withdrawal costs in total cost-of-ownership models, not just AUM rates.

Final assessment: who wins?

No single faction takes the crown across all use-cases. Instead, 2026 marks the beginning of a segmented market where:

Banks win corporate treasuries and risk-averse institutions that need regulatory alignment and fiat integration.
Specialized custodians win funds and fintechs needing fast crypto-native services with institutional controls.
Exchanges win high-frequency traders and retail clients with low explicit custody fees.
New entrants (MPC/wallets) win platform-scale retail and developer-first products.

Competition will compress fees but raise the bar on transparency and operational robustness. The practical winner for any investor will be the provider that balances security, cost, and product-fit against the regulatory landscape that is now far clearer than it was two years ago.

Call to action

If you manage institutional crypto assets, Treasury operations, or are evaluating custody providers, don’t go on headline fees alone. Download our custody due-diligence checklist and fee-negotiation templates tailored for 2026 market structures — or contact our team for a complimentary custody cost model tailored to your AUM and operational needs.

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