Private Key Management for Digital Asset Platforms

Video transcript

Most crypto hack losses now come through keys and signers, not code. How should a platform manage its private keys?

Guardian's analysis of DefiLlama data finds offchain attacks caused 82 percent of 2026's reported losses. Excluding Binance, key compromise is the largest loss class.

Tier keys by what they can move. Keep a small hot float, warm wallets behind approvals, and most client assets in cold, offline keys.

Some regulators set the cold share. Singapore's MAS expects keys for at least 90 percent of customers' assets in trust to stay offline.

Where should keys live? With an HSM, whoever controls the calling host can sign. In a cloud KMS, permissions are the policy. MPC policy sits in vendor software. Multisig is enforced onchain.

None of the four is enough alone. Hong Kong's SFC says recent incidents point to vulnerabilities regardless of the custody solutions used.

Enforce policy in the signing system, not someone's judgment. No one person moves funds alone, destinations are whitelisted, limits are automatic, and signers see every detail in readable form.

Generate keys in a witnessed, recorded ceremony. Back them up somewhere geographically separate. Rehearse timed recovery from backup alone. Rotate within about one to three years.

Guardian's OpSec audit covers custody and key ceremonies. Read the guide, or talk to Guardian about testing how your keys are held and signed.

Most crypto hack losses now come through keys, signers and infrastructure, not code. In Guardian's analysis of DefiLlama data, offchain attacks caused 82% of 2026's reported losses to November 2, under DefiLlama's labels.

About $6.36 billion left Binance on October 29, according to TRM Labs. TRM assesses that its hot wallet signing infrastructure was compromised, and noted Binance had not yet published a root cause.

Set Binance aside and 2026's largest loss class is key compromise: $721M across 36 incidents, in Guardian's count. See our crypto hack statistics and onchain vs offchain analysis.

Hot, Warm and Cold Tiers

Tier keys by how fast they can move funds, then size each balance to the risk. A common split:

Hot keys are the exposed tier. Bitget's $387M loss on September 24, 2026 carries DefiLlama's label "Hot wallet key compromised".

Some regulators set the cold share. Singapore's MAS, in its PS-G03 Guidelines, expects keys for at least 90% of customers' assets in trust to stay offline at all times.

For how custodians run these tiers, see our crypto custody guide.

HSM, KMS, MPC and Multisig

The four options differ in where the key lives and who enforces the policy.

HSMs

FIPS 140-3 defines four increasing security levels for cryptographic modules. Ask for the validation certificate.

Hong Kong's SFC expects keys generated offline where practicable and stored in a secure environment such as an HSM "with appropriate certification for the lifetime of the seeds or private keys".

It also expects HSM vendor due diligence, and prompt recertification after patches.

Cloud KMS

AWS KMS offers secp256k1, "commonly used for cryptocurrencies", on HSMs validated to FIPS 140-3 Level 3. Keys "never leave AWS KMS unencrypted."

So cloud permissions are the signing policy. And a key generated inside KMS has no copy outside it: AWS calls deletion irreversible after a 7 to 30 day wait.

MPC

MPC splits a key into shares that sign together. Fireblocks, an MPC vendor, says the complete key "is never assembled in one place, at any point in time."

MAS expects the shares held by different parties, so no one party can move assets: with three shares, two parties should be needed.

NIST's threshold work is at the call stage: its First Call for Multi-Party Threshold Schemes was finalized on January 20, 2026.

Multisig

A multisig is enforced onchain: the chain checks each signature against the contract's threshold. See multisig best practices.

But the SFC's August 2025 circular says cold wallet implementations "should not include smart contracts on public blockchains". SFC-licensed platforms using a contract multisig for client cold assets should raise it with counsel.

None of the four is enough alone. The SFC says recent incidents point to vulnerabilities "regardless of the custody solutions used", naming HSMs, MPC and multisig.

Signing Policies and Limits

The signing policy decides what any key may sign. Enforce it in the signing system, not in a person's judgment.

• No individual can authorize and effect a transfer alone (MAS 3.4.2).
• Segregation of duties and least privilege (MAS 3.4.3, SFC para. 8).
• Whitelisted destinations, with stringent controls on changes (SFC para. 9).
• Destinations that cannot change before signing and broadcast (SFC para. 6).
• Limits per transaction, per day and per tier, checked automatically.
• Dedicated approval devices, isolated from everyday workstations (SFC para. 10).
• Every detail in human-readable form before a manual signature (SFC para. 11).
• One key, one purpose, as NIST SP 800-57 advises.

One SFC good practice firm compares each signed transaction with the unsigned original, and never broadcasts a mismatch.

The SFC also expects real-time reconciliation of onchain client assets with the ledger.

Key Ceremonies

In 2026, a $116M loss DefiLlama lists under COLDCARD carries the label "Weak key generation".

CCSS v9 asks that key material be generated by the actor who will use it, with sufficient entropy. For client cold wallets, the SFC expects generation on air-gapped devices.

Keep this evidence for every ceremony:

• The approved script, and any deviations.
• Attendees, roles and witnesses, with identity checks.
• The device or HSM, its firmware and tamper seals.
• The entropy source.
• Derived addresses, checked against the record.
• A recording or signed log.

Our CASS 17.4 checklist maps that evidence to the FCA's custody rules.

Backup, Recovery and Rotation

Backup

NIST says private signature keys are, in general, not backed up, but backup "may be warranted in some cases". A wallet key is one: lose it and the funds are gone.

NIST says backed-up keys "shall be stored under the owner's control". CCSS v9 adds:

• A backup of the operational key material.
• Backups in a geographically separate location.
• At least one redundant recovery key in a multi-signer wallet.

Then recover from backup material alone, on a schedule, and time it. The SFC expects regular end-to-end rehearsals with third-party wallet providers.

Rotation and offboarding

NIST recommends a maximum cryptoperiod of about 1 to 3 years for a private signature key. Onchain, rotating means moving funds to new keys or replacing a signer.

CCSS asks for checklists covering every task when people leave or take on keyholder roles, and grant and revoke requests over approved channels.

Compromise plan

NIST says a compromise-recovery plan "shall be documented and easily accessible". It should name:

• Who to notify, and what to tell them.
• Who recovers, and how to re-key.
• Every key and where it is.
• How you confirm every affected key was replaced.

Testing the Signing Workflow

Test the whole path from request to broadcast:

• Can one insider or one stolen laptop move funds?
• Can anyone change a destination after approval?
• What does the signer's device actually show?
• Who can call the HSM or KMS signing API, and from where?
• Who can change wallet code, and who reviews it?
• Does recovery from backup alone work, and how fast?

The SFC expects periodic independent cybersecurity assessments of deployed wallet systems.

How Guardian Helps

Guardian's OpSec audit covers custody and key ceremony: where keys live, who holds each share, what a quorum needs in practice, and what happens when someone leaves.

For institutions, Guardian advises on custody and signing models before they are built, and pentests the cloud, IAM and secrets handling around them.

Its regulatory readiness work levels key management against CCSS and performs timed key recoveries. Guardian holds its own key management to the same CCSS bar.

Frequently Asked Questions

What is the difference between an HSM, KMS and MPC?

An HSM is tamper-resistant hardware that holds keys and signs inside itself. A cloud KMS is a provider-run service on HSMs, controlled through cloud permissions. MPC splits a key into shares held by separate parties that sign together.

Is MPC better than multisig?

Neither wins everywhere. Multisig is enforced onchain and visible, but needs a contract per chain. MPC works across chains, but its policy lives in vendor software. Hong Kong's SFC says licensed platforms' cold wallets should not include public-chain smart contracts.

How much should be in cold storage?

Singapore's MAS expects keys for at least 90% of customers' assets in trust to be held offline at all times. Size hot wallets to expected withdrawals, and refill them through approved, whitelisted transfers.

How often should private keys be rotated?

NIST recommends a maximum cryptoperiod of about 1 to 3 years for private signature keys. Rotate at once when a keyholder leaves or a device is lost or suspect, and rehearse the move.

Sources

• NIST: SP 800-57 Part 1 Rev. 5, Recommendation for Key Management, Part 1: General (May 2020)
• NIST: FIPS 140-3, Security Requirements for Cryptographic Modules (March 22, 2019)
• NIST: IR 8214, Threshold Schemes for Cryptographic Primitives (March 2019)
• NIST: Multi-Party Threshold Cryptography project (read November 2026)
• CryptoCurrency Certification Consortium: CCSS overview
• CryptoCurrency Certification Consortium: CCSS v9 Matrix
• SFC: Circular to licensed virtual asset trading platform operators on custody of virtual assets, 25EC44 (August 15, 2025)
• MAS: PS-G03, Guidelines on Consumer Protection Measures by DPT Service Providers (last revised September 19, 2024)
• AWS: What is AWS Key Management Service?
• AWS: AWS KMS key spec reference
• AWS: Delete an AWS KMS key
• Fireblocks: What is MPC (Multi-Party Computation)? MPC 101 (April 17, 2026)
• Guardian: Crypto Hack Statistics 2026, Losses, Vectors and Trends (November 2026)
• Guardian: Onchain vs Offchain Attacks, Where Hack Losses Came From (November 2026)
• Guardian: FCA Crypto Safeguarding, CASS 17.4 Key Management Checklist (November 2026)