What does Multi-Institution Custody protect against?

Insider threats (e.g., a rogue employee):

In traditional custody models, a single employee with privileged access could potentially move or compromise client funds. Multi-institution custody neutralizes this risk by requiring multiple parties to authorize any movement of Bitcoin, making it virtually impossible for a single bad actor to act alone.

External hacks (e.g., breach of a single custodian):

If a single custodian is compromised by a hacker, client assets could be at immediate risk. Multi-institution custody disperses access among independent entities, so even if one custodian is breached, the attacker cannot access or move client Bitcoin without consensus from the other institutions.

Technical failures (e.g., data loss or server outages):

Relying on a single custodian creates a single point of technical failure. If that custodian suffers from data loss, downtime, or a critical system failure, clients may temporarily or permanently lose access to their assets. In contrast, multi-institution custody ensures operational continuity even if one party’s systems go offline.

Legal or jurisdictional risks (e.g., one custodian being frozen or shut down):

Custodians may face legal action, government intervention, or regulatory restrictions that could impact their ability to operate. With multi-institution custody, assets remain safe and accessible even if one custodian is forced offline, frozen, or shut down, since the other key holders can still authorize access.

Key loss (with built-in recovery support):

In a single-key or single-custodian setup, loss of a private key can mean permanent loss of funds. With a 2-of-3 multi-institution setup, however, your Bitcoin remains recoverable even if one key is lost. Built-in key recovery mechanisms ensure that your assets stay safe and accessible over the long term.