The latest session in CFTE’s Blockchain and Digital Assets programme brought together participants from across the world for a deep dive into one of the most critical yet misunderstood areas of digital finance: digital asset custody. Led by Chee Keong, Associate Partner at EY specialising in digital assurance and blockchain services, the session unpacked how wallets actually work, the technologies behind custody solutions, and the security practices institutions must adopt as digital assets scale.
Chee Keong, who advises regulators, institutions and companies on digital assets, compliance and transformation, guided participants through the architecture, risks and evolving best practices of custody. Using real technical demonstrations, practical analogies and live quizzes, he broke down a topic often viewed as complex into clear, digestible concepts.
Understanding the Foundations of Wallets and Keys
Chee opened with fundamentals that many users misunderstand. A crypto wallet does not store cryptocurrency. Instead, it stores two essential elements:
- A public key, which functions like a bank account number for receiving assets
- A private key, which authorises transactions and must be kept secret at all times
Cryptocurrency itself is always stored on the blockchain. The wallet’s role is to sign and authorise movements of funds. He also explained how wallet addresses are created through one-way cryptographic hashing, and why seed phrases (12 or 24 words) are vital for wallet recovery, but also highly sensitive.
This led into hierarchical deterministic (HD) wallets, which use one master seed to generate multiple child wallets, improving privacy and operational flexibility.
Custodial vs Non-Custodial and Hot vs Cold Wallets
A clear distinction was drawn between:
- Custodial wallets, where a third party (e.g., an exchange) controls the keys
- Non-custodial wallets, where individuals or institutions control security directly
Chee also explained the differences between:
- Hot wallets: always online, fast, but more exposed
- Warm wallets: partially online
- Cold wallets: fully offline, highly secure but operationally slower
He emphasised that institutions often use a layered model, hot wallets for liquidity and cold wallets for long-term storage.
Multisig Wallets: Shared Control and Governance
The session then explored multisignature (multisig) wallets, which require multiple approvals to authorise transactions. This creates stronger governance, reduces single points of failure and reflects how corporate financial controls operate.
Chee showed how multisig:
- Works natively on blockchains like Bitcoin, using script-based logic
- Is implemented on Ethereum via smart contracts (e.g., Gnosis Safe)
- Can support complex authorisation structures (e.g., thresholds based on transaction amount or role-based approval)
However, he also highlighted the drawbacks: rigidity in Bitcoin’s setup and smart contract risk on Ethereum.
Multi-Party Computation (MPC): The Next Evolution in Custody
A major part of the session was dedicated to Multi-Party Computation (MPC), an advanced cryptographic method increasingly used by institutional custodians.
Key ideas included:
- MPC splits a private key into multiple “shares” across different parties
- No single party ever holds the entire key
- Signatures are collaboratively generated, appearing on-chain just like a normal transaction
- Governance rules (e.g., number of approvals) can be changed off-chain, unlike multisig
Chee illustrated this using an analogy of calculating average salaries without revealing individual values, demonstrating how MPC allows computation without full disclosure.
Emerging Developments and Best Practices
The session also touched on account abstraction on Ethereum, which moves wallet logic into smart contracts and enables flexible recovery methods, shared security across devices, and sponsor-paid gas fees. Chee noted both its promise and its new risk surface.
The session concluded with a comprehensive set of best practices for digital asset custody, including multi-layer governance, distributed key management, strong internal controls, independent backups, regular reviews, segregation of client assets, monitoring, due diligence on third-party providers and adherence to regulatory requirements.
5 Key Learning Outcomes from the Webinar
1. Wallets don’t store crypto, they store keys
Participants gained a clear understanding that wallets hold public and private keys, while assets remain on the blockchain. Seed phrases, HD wallets and key derivation were explained in practical terms.
2. Digital asset custody relies on both technology and governance
Chee showed how custodial vs non-custodial models, and hot vs cold storage, affect risk, usability and operational design. Institutions must balance speed and security through layered architectures.
3. Multisig enhances security but comes with trade-offs
Multisignature wallets distribute control across multiple signers and reduce single points of failure. But implementations differ across blockchains and can introduce smart contract or rigidity risks.
4. MPC offers flexibility, privacy and stronger security
Multi-Party Computation removes reliance on a single private key, supports dynamic governance changes and enhances resilience. It represents the next generation of institutional-grade custody solutions.
5. Strong custody requires layered controls and constant vigilance
From segregating duties and securing key backups to reviewing third-party providers, adhering to regulation and staying updated with protocol changes, effective custody demands ongoing governance, not just technology.
As digital assets continue to mature and move deeper into mainstream financial infrastructure, the importance of robust custody has never been greater. Chee Keong’s session underscored that securing digital assets is not simply a matter of technology, it is a disciplined blend of cryptography, governance, controls and continuous learning. By understanding the tools, risks and architectures behind modern custody models, leaders and practitioners can build systems that are resilient, compliant and future-ready. Sessions like this reinforce CFTE’s mission to equip professionals with the clarity and capability needed to navigate an increasingly digital financial world with confidence.
