FinTech

The Fintech Playbook for Secure Crypto Custody, Compliance, and Payments

Phelix K'Teya

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September 25, 2025

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In 2025, global cryptocurrency payment volumes have surpassed $10.8 trillion, with stablecoins like USDT and USDC accounting for nearly 60% of all on-chain transactions. The cryptocurrency market’s capitalization and role as a medium of exchange are expanding at an exponential pace, with fintechs shaping the frameworks that anchor digital assets into the regulatory landscape.

 

For digital-first players, the shift creates opportunities to accelerate cross-border settlements, build trust through secure custody, and scale efficiently with compliance-ready frameworks. Yet, opportunity is inseparable from scrutiny. Regulators in the U.S., EU, and emerging markets are tightening oversight, while institutional investors demand higher standards of security and transparency.

 

Fintechs are uniquely positioned to capitalize on this evolution, with their agility, customer-centric design, and technological expertise, which can bridge the gap between traditional finance and digital assets. The motivations are strong: meeting growing customer demand for crypto services, fostering innovation in payments and custody, and gaining a competitive edge in an increasingly crowded market.

 

This article unpacks the three pillars of a successful crypto-fintech strategy: custody, compliance, and crypto payments. To thrive in this new landscape, fintechs need to balance innovation with regulatory and operational safeguards, ensuring that trust, security, and growth go hand in hand.

Platforms like YoguPay are already demonstrating this bridge, providing crypto payment rails that blend security, compliance, and usability.

The Rise of Crypto in Fintech

The role of crypto in fintech has evolved dramatically over the past decade. In their early years, digital assets were largely viewed as speculative instruments, with Bitcoin dominating headlines as “digital gold.” Today, however, the conversation has shifted from speculation to utility. Cryptocurrencies, especially stablecoins, are emerging as reliable payment rails that solve real-world problems for businesses and consumers.

 

Fintechs are at the center of this evolution. Consider cross-border remittances, a $860 billion market, where average transfer fees remain close to 6%. Crypto-powered transfers, particularly through stablecoins, slash settlement times from days to minutes and reduce costs by more than half. Similarly, in merchant and cross-border settlements, providers like YoguPay are enabling businesses to accept stablecoins alongside traditional cards and mobile money.

 

Another area of rapid adoption is institutional use, where global payment giants like PayPal, Visa, and Mastercard have already integrated crypto into their networks, signaling mainstream recognition. Central banks are also experimenting with Central Bank Digital Currencies (CBDCs); with Nigeria’s eNaira, Brazil’s Drex, and China’s e-CNY offering early models of how state-backed digital money could coexist with private stablecoins.

 

For fintechs, crypto is now an expected service in many markets, especially with the growing adoption of digital assets for transactions. Those who fail to adapt risk losing relevance to faster-moving competitors, while those embracing crypto stand to redefine financial access, efficiency, and trust for the next generation of customers.

The Role of Custody in Cementing Trust in Crypto Finance

In traditional finance, custody means a bank or broker safeguards a client’s shares, bonds, or cash. With crypto, the principle is similar, but the stakes are higher. Digital asset custody is not about holding coins in a vault; it’s about securing the cryptographic private keys that grant ownership and access to assets on the blockchain. Lose the key, and the asset is gone forever since there are no banks or government agencies to bail you out.

 

In 2022 alone, more than $3.8 billion in digital assets were stolen through hacks and exploits, most tied to poor key management and weak custody practices. This underscores why custody is not just a technical detail but the very foundation of trust between fintech platforms and their users. Providers like YoguPay integrate regulated custodial partners into their infrastructure, giving businesses and consumers confidence that digital assets are secured with institutional-grade standards.

 

In response, regulators are tightening standards: for instance, the U.S. GENIUS Act requires all stablecoins to be fully collateralized by assets held in U.S. reserves, creating a safety net for users in the event of insolvency. This shift marks a broader movement toward institutional-grade safeguards, where custody solutions are expected to deliver the same level of resilience, transparency, and compliance as traditional financial systems.

 

 

Crypto Custody Models for Fintechs

Fintechs can choose from several custody models, each with its own trade-offs between security, control, and user experience. The right choice depends on the business model and target audience.

 

Self-Custody/User-Managed

In this model, the end-user is fully responsible for their private keys. A WaaS provider may issue a non-custodial wallet, but never has access to the user’s keys.

    • Pros: Eliminates the heavy regulatory burden and security risk of holding customer funds, providing maximum user control and autonomy.
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    • Cons: Puts the responsibility of security on the user, who may be non-technical and unprepared to safeguard their keys, heightening the risk of human error.

Use Case: Best suited for peer-to-peer (P2P) platforms where the user wants to retain full control.

 

Third-Party Custody

This is the model of choice for most institutional players and is rapidly becoming the standard for fintechs. A specialized, regulated Wallet-as-a-Service provider like YoguPay holds and manages the private keys on behalf of a fintech company and its users.

    • Pros: Offers enterprise-grade security, often with insurance, regular audits, and advanced key management systems. It lightens security and operational burdens, freeing teams to focus on their core product while reinforcing credibility with both regulators and customers.
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    • Cons: Introduces a centralized point of failure, meaning a fintech and its customers must place complete trust in the third-party provider.

Use Case: The most common and recommended model for fintechs looking to offer a secure, scalable, and compliant crypto service.

 

Hybrid Custody

Hybrid custody models combine the strengths of self-custody and third-party solutions to achieve resilience and scalability. A common approach is multi-signature (multi-sig) wallets, which require multiple private keys to authorize a transaction. This ensures that even if one key is compromised, the funds remain secure.

 

A more advanced solution is Multi-Party Computation (MPC), a cryptographic method that fragments a private key into several components and distributes them among different entities, typically a Wallet-as-a-Service (WaaS) provider and the fintech itself. Unlike multi-sig, no single party ever has full access to the key. Instead, the fragmented keys compute collaboratively to sign a transaction without exposing any part of the secret.

 

    • Technology Insight: MPC is considered a breakthrough for regulated-standard custody because it eliminates the single point of failure inherent in traditional key management. By decentralizing trust at the cryptographic level, fintechs can significantly reduce operational and security risks.

 

Use Case: Hybrid custody offers an optimal balance of security, user control, and operational efficiency, making it an increasingly attractive option for startups serving both retail and institutional clients. Compared to self-custody or third-party custody, hybrid approaches give fintechs the flexibility to innovate without sacrificing compliance, scalability, or customer trust.

 

 

Key Components of an Institutional-Grade Custody Solution

Regardless of the model chosen, a robust custody solution must incorporate several key features:

    • Secure Key Management: The use of Hardware Security Modules (HSMs), which are tamper-proof physical devices that securely store cryptographic keys, is the industry standard for cold storage.
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    • Cold vs. Hot Storage: A robust custody solution uses both solutions. Cold storage (offline) is for the vast majority of assets, protecting them from online hacks. Hot storage (online) holds a small, liquid amount for daily transactions. A solid system uses a hybrid model, moving funds from cold to hot storage only when necessary.
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    • Insurance and Auditing: Reputable custodians not only provide insurance against theft but also undergo independent third-party audits to validate their security controls. These safeguards are essential to earning and maintaining customer trust. By working with partners that meet these standards, a WaaS like YoguPay signals to merchants and consumers that security is embedded into every transaction.

At the same time, regulators worldwide are increasingly mandating that digital assets, particularly stablecoins, be backed by fiat reserves or government treasuries. This regulatory alignment reinforces credibility and positions these assets as a cornerstone of the emerging crypto payments ecosystem.

 

    • Segregation of Funds: Legally and ethically, a fintech must keep customer assets separate from its own operational funds to protect customer capital in the event of a company’s bankruptcy.

 

 

Navigating Regulatory Complexity in Crypto

The rapid adoption of digital assets comes with heightened regulatory scrutiny, as governments seek to address risks such as money laundering, terrorism financing, tax evasion, and consumer exploitation.

 

Yet the regulatory landscape remains fragmented, a patchwork of rules that vary across jurisdictions and evolve quickly. What may be permissible in one country could be strictly prohibited in another, making it essential for fintechs to stay informed about the mandates of key regulatory bodies and adapt accordingly.

 

    • Global Bodies: The Financial Action Task Force (FATF) has been highly influential, setting global standards for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) that many countries, including the US and EU, have adopted.

The FATF travel rule requires Virtual Asset Service Providers (VASPs), including fintechs and WaaS providers, to exchange originator and beneficiary information with each other for transactions above a certain threshold ($1,000 USD). This is the crypto equivalent of a wire transfer’s data requirements.

    • The Security vs. Commodity Debate: In the U.S., the security vs. commodity debate dictates whether a token falls under SEC or CFTC oversight, shaping its entire compliance path.
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    • US Regulators under the GENIUS Act: With the 2025 GENIUS Act, payment stablecoins issued by licensed entities are no longer treated as securities or commodities, removing SEC and CFTC oversight. Instead, regulatory responsibility shifts to banking supervisors, with strict reserve, audit, and disclosure requirements for permitted issuers.

 

In Africa, however, regulators are still developing classification frameworks. South Africa, for example, has designated crypto assets as financial products requiring licensing, while Kenya has taken a different route; first introducing a 3% digital asset tax in 2023, later replaced in 2025 with a 10% excise duty on service fees charged by exchanges and wallets.

 

Alongside this, Kenya’s proposed VASP Bill would mandate local licensing, strict AML/KYC compliance, and dual oversight by the Central Bank and Capital Markets Authority. Ghana, meanwhile, remains in consultation stages, focusing on AML and consumer protection.

For fintechs, this means compliance is less about fitting into rigid categories and more about engaging regulators early to help shape evolving rules while building customer trust.

 

 

Foundational Compliance Requirements

No matter the jurisdiction, several core compliance requirements are universal for any crypto business.

 

Know Your Customer (KYC) and Anti-Money Laundering (AML): These are the cornerstones of financial compliance. For crypto, they are even more critical due to the hidden identity nature of blockchain transactions.

    • Why they’re critical: They are designed to prevent the use of financial systems for illicit activities like money laundering, terrorist financing, and sanctions evasion.
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    • Crypto-Specific Challenges: Although crypto transactions only require a blockchain address, fintechs must verify the identity of the person behind that address. This requires a robust identity verification process.
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    • Best Practices: Implementing automated identity checks, using facial recognition and document verification, and conducting ongoing due diligence to monitor user activity for suspicious patterns.

 

Transaction Monitoring: Know Your Transaction (KYT) is the crypto equivalent of traditional transaction monitoring. It involves using specialized blockchain analytics software to screen all on-chain activity.

    • The Concept: Fintechs must analyze transactions for connections to sanctioned addresses, known darknet markets, or other illicit entities.
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    • Technology: AI-powered tools are a necessity. They analyze transaction flows, flag high-risk activity (e.g., funds sent to a mixer service), and provide a risk score for each transaction.
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    • Compliance Solutions: The Travel Rule has created a new challenge for the industry, leading to the development of dedicated technology solutions that enable VASPs to securely share originator and beneficiary information.

 

Compliance as a Growth Driver

Fintech founders often see compliance as friction, instead of a competitive differentiator:

 

    • Faster partnerships: Banks and payment processors prioritize working with fintechs that meet strong compliance standards.
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    • Market expansion: With licenses and AML systems in place, startups can expand into new countries without starting regulatory discussions from scratch.
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    • Investor confidence: Venture capital firms increasingly check compliance maturity before deploying capital. A fintech with poor compliance is seen as a regulatory risk.

YoguPay’s compliance-ready infrastructure enables faster partnerships and smoother integrations for merchants who want stablecoins alongside traditional payments.

 

 

Building a Robust Compliance Framework

A proactive approach to compliance is non-negotiable.

 

    • Proactive Risk Assessment: Continuously assess your business for risks, from new regulations to emerging cyber threats.
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    • Internal Controls & Policies: A well-documented compliance manual that outlines policies, procedures, and internal controls is crucial.
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    • Compliance Technology: Partnering with a specialized RegTech provider can automate KYC, AML, and transaction monitoring, ensuring scalability and accuracy.
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    • Legal and Expert Counsel: Given the complexity of the regulatory landscape, fintechs should partner with legal experts specialized in digital assets and crypto regulation.

 

The Cost of Non-Compliance

The downside of ignoring compliance is devastating for exchanges, fintechs, and PSPs.

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    • Loss of licenses: Several exchanges, including Binance in Belgium, were forced to suspend operations due to compliance failures.
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    • Customer trust erosion: Once customers perceive a platform as unsafe or shady, rebuilding trust becomes nearly impossible.

 

 

Crypto Payments: The Next Frontier for Fintech

Beyond simply holding assets, crypto payments unlock a new realm of possibilities for fintechs and their customers.

    • Lower Fees and Faster Settlements: Traditional international payments are often slow and expensive, with multiple intermediaries. Crypto payments, particularly with stablecoins, can be settled globally in minutes for a fraction of the cost.
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    • Global Reach: The borderless nature of crypto payments allows fintechs to serve previously inaccessible or unbanked populations and expand their business globally without reliance on traditional banking infrastructure.
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    • Chargeback Reduction: Unlike credit card payments, blockchain transactions are irreversible. This eliminates the risk of fraudulent chargebacks, a significant pain point for many merchants.

 

 

Challenges in Payment Integration

While the benefits of crypto payments are compelling, fintechs must also navigate several practical challenges to ensure systems are secure, scalable, and reliable.

Price Volatility

The value of cryptocurrencies can swing dramatically within hours. For example, Bitcoin has seen intraday swings of 5–10%, making it risky for merchants to accept payments without immediate conversion. A payment worth $1,000 in BTC at the point of sale could be worth only $900 by the time it’s settled in fiat.

 

Solution: Stablecoins, such as USDC or USDT, mitigate this risk by pegging value to the U.S. dollar and other stable assets. Additionally, fintechs can integrate with payment gateways that offer real-time conversion to fiat, shielding both businesses and customers from sudden losses.

 

Technical Complexity

Implementing crypto payments involves more than adding a “Pay with Crypto” button. Teams must manage private keys, interact with multiple blockchain networks, and navigate complex API integrations. A single integration error could result in failed transactions or, worse, lost funds.

 

Solution: To overcome these hurdles, many fintechs partner with Wallet-as-a-Service providers or established payment gateways. A WaaS partner like YoguPay abstracts the blockchain complexity, offering ready-made APIs, wallet management, and compliance layers that accelerate time-to-market.

 

Liquidity Management

Unlike traditional payment systems with centralized clearing, crypto payments require fintechs to manage liquidity for seamless conversions. Without sufficient liquidity, a fintech risks payment delays, failed settlements, or unfavorable conversion rates that erode margins. For instance, in cross-border remittances where Africa alone processed $94 billion in inflows in 2024, inadequate liquidity can make the difference between instant settlement and multi-day delays.

 

Solution: Building relationships with liquidity providers, OTC desks, and market makers is essential. Some fintechs also integrate automated treasury management tools to balance crypto and fiat reserves dynamically. Securing deep liquidity pools guarantees PSPs and financial institutions will meet customer demand for instant conversions without disrupting cash flow or pricing.

 

These challenges demonstrate that successful integration of crypto payments requires a mix of technology, compliance and liquidity partnerships to reduce friction in developing new rails.

 

Fintechs that align with trusted providers like YoguPay, which deliver seamless APIs, liquidity coverage, and compliance-ready infrastructure, are better positioned to scale crypto payments responsibly and competitively.

 

 

Conclusion: Building Trust in a Decentralized World

The crypto revolution is not a passing trend but a structural shift in the global financial landscape, and fintechs can either embrace the change or risk irrelevance. Yet the road ahead is complex. Despite the road ahead being complex, building resilient crypto infrastructure is essential to earning trust and managing risk effectively.

 

By prioritizing bank-grade security, adopting proactive compliance frameworks, and enabling seamless payment experiences, fintechs can position themselves as leaders in a tokenized economy.YoguPay makes this possible by unifying custody, compliance, and payments into one platform, empowering fintechs to scale faster, stay compliant, and win customer trust. Contact us today to stay ahead in the decentralized era.