Custody with Governance Rights vs. Custody without Governance

Active Custody (with Governance Rights) excels at aligning asset security with protocol influence because it allows token holders to participate directly in votes on proposals. For example, a DAO treasury managed via a Gnosis Safe multisig can use its staked Aave or Uniswap tokens to vote on fee switches or parameter changes, directly impacting protocol revenue and direction. This model is critical for funds, foundations, and active investors whose strategy depends on governance alpha.

Passive Custody (without Governance Rights) takes a different approach by decoupling asset safekeeping from on-chain activity. This results in a trade-off of enhanced security and compliance simplicity at the cost of protocol influence. Custodians like Coinbase Custody or Fireblocks often hold assets in a non-delegated state, which simplifies regulatory reporting (e.g., for a publicly traded company's treasury) and eliminates the operational overhead and smart contract risk associated with voting. The key metric here is risk reduction, not yield generation.

The key trade-off: If your priority is maximizing influence and yield from governance participation (e.g., a crypto-native fund or a DAO), choose an active custody solution like a self-managed multisig or a delegated service like Figment. If you prioritize regulatory compliance, institutional-grade security, and operational simplicity (e.g., a corporate treasury or a regulated ETF), choose a passive custody provider that prioritizes asset safekeeping above all else.

Custody with Governance Rights excels at aligning asset security with protocol influence because it grants direct voting power over critical decisions like fee changes, treasury allocation, and protocol upgrades. For example, a DAO holding its treasury in a Gnosis Safe with attached governance tokens can directly vote on proposals from Uniswap or Compound, turning passive assets into active levers for ecosystem strategy. This model is essential for protocols, venture funds, and DAOs whose success is tied to the direction of the underlying networks they use.

Custody without Governance Rights takes a different approach by decoupling asset security from protocol politics. This results in a trade-off of reduced influence for enhanced operational simplicity and risk isolation. Services like Fireblocks or Coinbase Custody focus purely on secure, compliant asset storage, often with higher insurance limits (e.g., up to $1B+ in coverage) and institutional-grade compliance frameworks. This model is preferred by traditional asset managers, corporations, and entities where regulatory clarity and minimizing operational overhead are paramount.

The key trade-off: If your priority is maximizing protocol influence and participating in ecosystem governance, choose a custody solution with integrated governance rights, typically through self-custody tools like Safe{Wallet} or specialized DAO treasuries. If you prioritize regulatory compliance, institutional insurance, and minimizing operational complexity, choose a qualified custodian that separates asset safekeeping from governance, even if it means forgoing direct voting power.