Your role in digital assets

You now know how digital assets work and how to think about risk. To bring the two together, start where risk always starts: what are you actually doing? Saying a firm is “involved in blockchain” doesn’t tell you much. Here are the most common roles:

• Custody: holding digital assets safely on behalf of clients. The assets belong to the clients, not to you.
• Holding on your own balance sheet: owning digital assets as your own investment, so their value is part of what your firm is worth.
• Lending: lending money and taking digital assets as collateral, meaning something the borrower hands over that you keep if they don’t pay you back.
• Trading and exchange: buying and selling digital assets, or running a marketplace where others do.
• Advising: helping wealth clients decide whether to own digital assets and how much, much like a financial advisor does with stocks.

Each role changes the risk. If Bitcoin’s price falls sharply, a custodian doesn’t lose the Bitcoin’s value directly, because it belongs to clients. But custody fees are usually a percentage of the assets held, so the custodian earns less. A firm holding Bitcoin on its own books loses value straight away. A lender worries whether the collateral still covers the loan, and an advisor worries about whether the advice was right for each client. So before asking “What are the risks of Bitcoin?”, ask “What is my role?” The Bitcoin collateral example shows how this plays out.