What is the main trade-off when using a third-party custodian for crypto assets?

Higher transaction fees but faster transfers.
Limited asset options but enhanced portfolio diversity.
Lack of KYC requirements but reduced security.
Convenience at the cost of losing control over private keys.

Why are crypto exchanges a common choice for third-party custody?

They guarantee recovery of funds in case of bankruptcy.
They are convenient for buying, storing, and trading crypto.
They are immune to hacks and security breaches.
They only use cold storage for storing their funds.

Which incident is a notable example of risks in crypto exchanges?

Binance offering spot trading.
LUNA’s offering of high-yield investments.
The Mt. Gox hack, resulting in massive Bitcoin losses.
JPMorgan offering crypto services for the first time.

What feature makes dedicated crypto asset managers suitable for institutions?

They provide insurance coverage and personalized portfolio management.
They allow self-custody.
They do not require compliance with local regulations.
They offer the lowest fees.

What is the advantage of using traditional financial institutions for crypto services?

Unlimited anonymity in transactions.
No need for KYC compliance.
Ease of converting savings into crypto and seamless transfers.
Higher security but no regulatory oversight.

What is the purpose of multi-signature wallets in third-party custody?

To divide private keys into parts shared among multiple parties.
To provide a single secure key for account holders.
To simplify recovery of lost passwords.
To store all assets in cold storage.

What type of insurance is typically provided by third-party custodians?

Coverage against market price volatility.
Protection against failed investments.
Safeguards against hacks and security breaches.
Reimbursement for non-compliance penalties.

Which is NOT a common security feature of third-party custodians?

Multi-signature wallets and biometric authentication.
Regular audits and compliance with AML regulations.
Insurance for funds.
Complete anonymity for all transactions.

Cathie Wood is considering storing her crypto assets with a third-party custodian. She is a high net worth individual looking for better security and insurance. Which option is best suited for Cathie?

A self-custody wallet.
A crypto exchange.
A dedicated crypto asset manager specializing in institutional clients.
A DeFi platform.

Elon stored his funds with a crypto exchange that recently went bankrupt. He discovered that the exchange did not have sufficient insurance coverage. What is the most likely outcome for Elon?

He will recover all his funds through market adjustments.
He may lose most of his assets with little to no reimbursement.
He can file a claim to regain full access to his funds.
He will be automatically transferred to a new custodian.

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Third-Party Custody Solutions
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