A digital asset custodian is a company that holds cryptocurrency and other digital assets on behalf of clients and keeps them safe. Because whoever controls the private keys can move the assets, a custodian's core job is protecting those keys, combined with a legal promise that the assets belong to the client. The service, the firms that offer it and its risks are explained in full in the Crypto Custody entry.
Custodians include specialist crypto firms, trust companies, traditional custodian banks and exchanges. They typically keep most assets offline in cold storage, split control of keys between several people or machines using multi-signature or multi-party computation (MPC) wallets, and hold insurance. Institutional investors such as funds often must use a regulated custodian rather than holding coins themselves.
The main question for clients is whether their assets are kept separate from the custodian's own and would be returned if it failed. Customers of a custodial wallet at a failed exchange have sometimes found their coins treated as the firm's property.