As digital assets transition from niche markets into mainstream adoption, the need for robust digital asset custody solutions becomes increasingly critical. Institutions managing significant digital asset holdings face amplified threats, regulatory scrutiny, and operational complexities. This makes secure digital asset custody a paramount concern. At Cordial Systems, we believe Multi-Party Computation (MPC) wallets offer a sophisticated solution to address these needs, providing substantial security enhancements across both hot and cold wallet environments.
Understanding the Need for Enhanced Digital Asset Custody
Digital asset custody solutions typically rely on two types of wallets: hot wallets and cold wallets. Hot wallets are online and connected directly to the internet, making them convenient for frequent transactions but vulnerable to hacks and theft. Conversely, cold wallets store assets offline. This reduces the attack surface but introduces operational friction due to limited accessibility.
Institutions require a custody solution that effectively combines security with accessibility. MPC wallets leverage advanced cryptographic methods to provide a unique blend of security and usability, making them ideal for institutional-grade digital asset custody.
What Is an MPC Wallet?
Multi-Party Computation (MPC) refers to a cryptographic protocol allowing multiple parties to jointly compute a function without revealing their private inputs. In digital asset custody, MPC technology secures wallet private keys by dividing them into multiple cryptographic shares distributed across independent parties.
According to our comprehensive guide to MPC wallets, this cryptographic model ensures no single party has complete control or access to the full private key. Instead, multiple parties must collaborate to authorize transactions, effectively eliminating single points of failure.
MPC Hot Wallets: Secure, Flexible, and Scalable
MPC hot wallets maintain online connectivity, providing rapid transaction processing necessary for active trading and operational flexibility. The primary challenge for hot wallets has historically been cybersecurity—particularly the risk of private key compromise.
MPC technology dramatically reduces these risks by dispersing cryptographic key shares across multiple devices and participants. A malicious actor would need to compromise multiple independently secured systems simultaneously, significantly increasing the difficulty and cost of attacks. MPC hot wallets enable institutions to seamlessly adapt their security policies by dynamically adding or removing key-holding parties, providing enhanced operational scalability.
JPMorgan’s 2024 Project EPIC whitepaper highlights the use of MPC wallets in streamlining tokenized asset transactions, reinforcing their practicality in hot wallet contexts for settlement, compliance, and liquidity provisioning.
In real-world terms, an MPC hot wallet provides a practical solution for institutions needing high-frequency transactions without sacrificing control or auditability. Trading desks, decentralized finance (DeFi) platforms, and payment gateways benefit from the ability to execute secure transactions in seconds, while maintaining compliance oversight.
MPC Cold Wallets: The Ultimate Security Layer
Cold wallets have historically been favored by institutions managing large digital asset portfolios due to their inherent security advantage. Because the private key material is kept offline and isolated from network access, cold storage eliminates many remote attack vectors that target internet-connected infrastructure. However, traditional cold wallets often involve cumbersome operational procedures, including manual interventions that can delay critical transactions.
Using an MPC signature in an online system for authorization and authentication purposes offers a significant improvement on basic offline key storage in a hardware security model. This approach ensures digital assets remain isolated from online threats, yet enables streamlined coordination for transaction authorization and derisking the transaction process (along with the transaction message itself) before presenting to an offline private key.
Additionally, MPC integrated cold wallets support programmable policies—such as requiring threshold approvals or time locks—which further strengthen governance and operational control. This is especially important for asset managers, pension funds, and sovereign wealth funds holding long-term positions. Likewise, fulfills the increasing requirement for self hosted and offline storage for local market players in regions such as Hong Kong, Singapore, Turkey, and others.
The Synergy of MPC Hot and Cold Wallets
A comprehensive digital asset custody solution often involves strategically combining MPC hot and cold wallets, leveraging their respective strengths. Institutions typically deploy MPC hot wallets for assets requiring frequent, agile transactions such as those handled by trading desks, liquidity providers, or payment processors. Conversely, MPC with cold wallets secure long-term, high-value asset storage, such as treasury reserves or as part of satisfying regulatory requirements on holding client assets.
This balanced approach optimizes risk mitigation and operational efficiency. Assets can transition securely and swiftly between wallet types based on evolving institutional needs, leveraging MPC’s cryptographic robustness and operational flexibility.
Regulatory Considerations: MPC and Compliance Readiness
As regulators in jurisdictions like the EU (under MiCA) and the U.S. increase scrutiny around digital asset custody, institutions must ensure they are meeting auditability, traceability, and access control standards.
MPC aligns well with these needs. Because key shares are never reconstructed and transaction approval requires multi-party consensus, MPC inherently provides a verifiable and enforceable control structure. Additionally, because many MPC platforms generate immutable audit logs, they assist in proving compliance with internal controls, SOC 2, ISO 27001, and other governance frameworks.
Zero Trust and MPC Wallet Infrastructure
Integrating MPC wallets within a Zero Trust security model significantly enhances their effectiveness. Zero Trust assumes threats can originate internally or externally, mandating rigorous verification for every access request, transaction, or operation.
At Cordial Systems, we regard Zero Trust as essential for financial institutions due to its comprehensive identity verification, stringent access controls, and continuous monitoring capabilities. Combining MPC with Zero Trust ensures explicit transaction verification, secure cryptographic share distribution, and continuous auditing, substantially reinforcing institutional trust and compliance.
Adhering to the tenets of Zero Trust is imperative for institutions because it addresses vulnerabilities created by remote working, cloud-based infrastructures, and sophisticated insider threats, significantly strengthening security postures.
Market Adoption and Strategic Imperatives
Institutional interest in MPC custody infrastructure continues to grow, driven by rising demand for secure, scalable, and compliant solutions. Many financial institutions are exploring MPC as a strategic move in light of evolving custody challenges and market risks.
In 2025, we’re seeing this adoption broaden beyond crypto-native firms. Large fintechs, neobanks, and even insurance firms are beginning to integrate MPC custody models. Industry momentum continues to build around MPC architecture. Insights from institutions such as JPMorgan and leading custody providers highlight a shift toward MPC as the foundation for scalable, secure, and compliant digital asset infrastructure, especially in light of tokenization initiatives and the push for operational resilience.
Future Outlook and Conclusion
As digital assets mature and regulatory expectations evolve, institutions increasingly demand custody solutions that combine robust security with operational flexibility. MPC wallets represent a foundational innovation in digital asset custody, not as a binary choice between hot or cold storage but as an adaptable architecture that can support both, depending on institutional objectives and risk profiles.
By decoupling custody architecture from rigid hot and cold definitions, MPC enables institutions to align cryptographic security, operational efficiency, and compliance within a unified framework that supports both immediate liquidity needs and long-term storage requirements. When deployed alongside advanced security models such as Zero Trust, MPC delivers the resilience and adaptability required for institutional-grade digital asset custody.
At Cordial Systems, we believe the future of custody is not defined by static categories of hot or cold but by the flexible, architecture-driven capabilities that MPC makes possible.
To learn how Cordial Systems can help your institution design a secure, MPC-based custody architecture, contact us.
