The Federal Bank is launching AMIS Cold Wallet custody for Bitcoin. Is it the most stable solution for virtual assets?

On September 9th, after obtaining approval from the Financial Supervisory Commission, the Federal Bank officially announced the launch of the "Virtual Asset Custody Pilot Business," becoming one of the first banks in Taiwan to offer crypto asset custody services. In the first phase, it will collaborate with Taiwanese crypto exchanges, utilizing its AMIS Cold Wallet technology to provide the highest level of security for virtual assets such as Bitcoin (BTC) and Ether (ETH).

However, is the Cold Wallet really the most secure solution? In the wave of banks fully entering the virtual asset custody, safety, compliance, and subsequent commercialization are the key factors that determine success or failure.

Why are banks rushing into virtual asset custody?

As the encryption market matures, how to securely store virtual assets has become a new battlefield for the financial industry. Compared to personal custody, bank custody introduces the strict standards of traditional finance into the digital asset space, providing customers with an additional layer of security.

The Taiwan Financial Supervisory Commission pointed out that banks currently mainly adopt two types of custody mechanisms:

Cold Wallet: Private keys are stored offline, completely isolated from the internet, providing the highest level of defense against hacking.

Private Key Sharding Management: The private key is divided into multiple parts and stored in different locations (such as cloud servers, Hardware Security Modules HSM). Even if part of it is leaked, it does not affect asset security.

Federal Bank's Choice: AMIS Cold Wallet

Unlike the private key sharding management used by Cathay United Bank and KGI Bank, the Federal Bank has chosen to collaborate with Taiwan's encryption exchange to adopt AMIS Cold Wallet technology.

The Federal Bank stated that the choice to partner with a large encryption exchange is due to its expertise and stability in the asset custody field, which can provide clients with the highest level of protection.

During the trial phase, the Federal Bank will provide virtual asset custody services for Taiwan's encryption exchanges on a small scale, with the possibility of expanding the scope of cooperation in the future.

The Virtual Asset Landscape of Taiwan's Banking Industry

Since the end of 2024, when the Financial Supervisory Commission launched the pilot program for "virtual asset custody business", four banks have taken the lead in applying and have been approved for the trial:

KGI Bank: HSM-based Private Key Sharding Management

China Trust Bank: Targeting high-asset corporate accounts, details confidential.

Cathay United Bank: Institutional-Level Cold Wallet and Multi-Signature Process

Federal Bank: Collaborating with Taiwan's encryption exchange to adopt AMIS Cold Wallet

The market has reported that several banks are in discussions for related cooperation, and more participants are expected to join.

Cold Wallet vs. Private Key Sharding: Which is More Secure?

The advantage of a Cold Wallet lies in its "physical isolation," making it nearly impossible for hackers to invade through the network; however, the downside is that it is inconvenient to operate, and the withdrawal and transaction speed are relatively slow.

Private key sharding management strikes a balance between security and efficiency, making it suitable for institutional users who need to trade frequently, but it imposes higher requirements on system design and maintenance.

Therefore, which method is more stable depends on customer needs and usage scenarios. For large assets that are held long-term and not traded frequently, the security advantages of a Cold Wallet are evident; whereas institutions that engage in high-frequency trading or need flexible fund allocation may prefer private key sharding.

Next Steps After Bank Custody

Chen Hongzhi, project manager of the Taiwan Bank Innovation Laboratory, suggested that banks should gradually enter the virtual asset market:

Infrastructure: Establishing bank-grade secure custody capabilities

Compliance Alignment: Strengthening AML, KYC, Risk Disclosure, and Consumer Protection

Product Ecosystem: Starting from compliant products, gradually expanding to inter-institutional cooperation and shared liquidity platforms.

The Deputy Executive Director of the Digital Asset Development Research Center, Guo Maoren, reminds that if banks only remain in the role of "custody", it will be difficult to establish long-term competitiveness. They must extend the low-risk returns, reward mechanisms, and cross-market clearing capabilities of traditional finance into the digital asset space.

Conclusion

The launch of the AMIS Cold Wallet by the Federal Bank is undoubtedly a significant highlight in Taiwan's banking industry's virtual asset custody market. The security of the Cold Wallet is beyond doubt, but for banks to succeed in this new game in the future, the key lies not only in "safeguarding assets" but also in whether they can create digital asset services that possess financial value and market competitiveness on the basis of compliance and security.