Token Custody

Silsilat partners with regulated Digital Asset Custody Providers (DACPs). Her we explain how custody workflows operate, and how this ensures trust, compliance, and investor protection in a hybrid DeFi–TradFi model.

Token Custody & Licensed Custodian Integration

Silsilat’s architecture bridges decentralized liquidity with real-world finance. To achieve institutional-grade security, compliance, and accountability, all investor and pool tokens are safeguarded by a licensed Digital Asset Custody Provider (DACP).

This ensures that even while Silsilat operates on a distributed ledger, every digital asset, whether a tokenized gold receipt (SAG), liquidity share (LQT), or treasury token (SLC) is stored, managed, and audited under regulated custody standards.

Why Custody Matters

In traditional finance, trusted intermediaries (banks, trustees, or depositories) hold client funds securely. In decentralized finance, assets are typically held in self-custody wallet which are powerful but risky for retail and institutional investors alike.

To build confidence with pawnshops, investors, and regulators, Silsilat introduces hybrid custody combining on-chain transparency with off-chain legal assurance.

Key Objectives of Custody Integration:

Objective

Explanation

Investor Protection

Prevent unauthorized access or loss of investor funds through regulated key management.

Regulatory Compliance

Align with Bank Negara Malaysia (BNM), Labuan FSA, and Securities Commission (SC) digital asset guidelines.

Operational Integrity

Ensure segregation of client assets from platform operating accounts.

Audit & Insurance

Provide full audit trails and coverage under licensed custodian insurance policies.

Institutional Access

Enable banks, funds, and corporates to participate under existing fiduciary regulations.

Role of the Licensed Digital Asset Custodian

Silsilat integrates with licensed DACPs in Malaysia and abroad (e.g., Labuan, Singapore) to ensure compliance with local and cross-border asset management rules.

Custodian Responsibilities

  1. Wallet Management & Key Security

    • Custodian manages segregated wallet addresses for:

      • Pawnshops (collateral management)

      • Liquidity pools (investor deposits)

      • Treasury reserves (platform funds)

    • Uses MPC (Multi-Party Computation) or HSM (Hardware Security Modules) for secure key control.

  2. Asset Segregation

    • Client assets are legally and technically separated from Silsilat operating accounts.

    • Tokens are traceable to specific clients and funds.

  3. Reconciliation & Reporting

    • Daily reconciliation of wallet balances vs. Hedera on-chain records.

    • Weekly and quarterly reports for regulator and auditor nodes.

  4. Insurance Coverage

    • Custodian maintains insurance against theft, fraud, or operational loss.

    • Policies typically cover both hot and cold wallets.

  5. Regulatory Oversight

    • Licensed and monitored under jurisdictional digital asset frameworks:

      • Labuan FSA Digital Asset Custody Licence

      • SC Malaysia Digital Asset Custodian (DAC) framework

      • MAS (Singapore) Trust or Custody licence

Custody Workflow

Steps Explained

  1. Deposit — Investor deposits fiat or stablecoin through the platform.

  2. Custody Transfer — Funds move directly to the DACP-controlled wallet.

  3. Verification — Custodian issues a signed proof-of-holdings certificate (hash anchored on HCS).

  4. Execution — Liquidity Pool Smart Node executes matching and disbursement logic.

  5. Auditability — Regulators or auditors can query proof hashes to confirm custody status.

Custody Record Example

Each custody event generates a proof object, logged on the Hedera Consensus Topic for transparency.

This proof links:

  • Wallet identity (DAC-controlled)

  • Asset metadata (type, amount, timestamp)

  • Insurance reference

  • Audit record CID stored on IPFS

Benefits of Custody Integration

Stakeholder

Benefit

Investors

Guaranteed asset safety, audited storage, and insurance protection.

Pawnshops

Confidence that their pledged assets correspond to verified on-chain funds.

Regulators

Transparent audit access and proof of segregation of client assets.

Silsilat Platform

Reduced operational and reputational risk.

Institutional Participants

Compliance with fiduciary and anti-money laundering laws.

Hybrid Custody Architecture

Layers Explained:

  • Custody Layer: Licensed provider holds private keys and operates custody wallets.

  • Consensus Layer: Hedera HCS records all custody proofs and yield events.

  • Smart Node Layer: Executes loan settlements and yield payouts only upon verified custody confirmation.

  • Cold Vault Layer: Long-term storage for reserve and treasury assets.

  • Regulatory Layer: Oversight through HCS read nodes and audit queries.

Custody Integration Policy

Every liquidity pool and treasury account on Silsilat is governed by a Custody Integration Policy (CIP) defining:

Parameter

Requirement

Custodian Status

Must hold valid DAC license in recognized jurisdiction

Proof of Custody

Required for every deposit and withdrawal

Insurance Coverage

Minimum USD 5M equivalent

Cold Storage Ratio

≥ 80% of long-term assets

Key Management

HSM or MPC-based multi-signature control

Data Retention

Minimum 7 years of custody logs

Audit Frequency

Quarterly external + annual regulator audit

Each CIP is version-controlled and its hash is published on-chain via a Custody Policy Topic (HCS_CUSTODY_TOPIC_ID).

Custody in Loan Lifecycle

Lifecycle Stage

Custody Function

Loan Issuance

Custodian verifies liquidity pool balances before fund release

Loan Tenure

Custodian holds reserve and yield accruals

Redemption

Custodian verifies repayment and initiates burn event for SAG

Settlement

Yield distributed to investor wallets through custodian-signed transactions

This ensures that every unit of tokenized gold collateral and corresponding liquidity remains fully backed, reconciled, and insured.

Regulatory Alignment

Silsilat’s custody integration adheres to the key regulatory frameworks for digital assets:

Jurisdiction

Framework / Reference

Relevance

Malaysia

Securities Commission DAC Guidelines (2023)

Defines legal requirements for custody of tokenized assets

Labuan FSA

Digital Asset Custodian Licensing (2022)

Enables offshore custody for global investors

Singapore

MAS PS Act (Custody Services)

Ensures cross-border compliance

FATF VASP Guidance (2021)

Global AML/CFT standards

Meets Travel Rule and source-of-funds traceability

Summary

The Licensed Digital Asset Custodian model transforms Silsilat from a DeFi protocol into a regulated, institution-ready financial infrastructure. It combines the speed and programmability of decentralized finance with the trust and protection of regulated custody.

Key Takeaways:

  • All tokens (SAG, LQT, SLC) are stored under licensed, insured custody.

  • Proof-of-custody events are logged and verifiable on Hedera.

  • Custodians provide regulatory and investor assurance under strict DACP frameworks.

  • Hybrid custody enables participation from banks, funds, and government agencies.

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