How business continuity planning can protect institutional crypto assets

More and more institutions are adopting crypto. Hedge funds, family offices, asset managers, and traditional financial institutions are increasingly recognising the potential of digital assets. But this expansion of the financial landscape comes with unique operational risks. The volatile, 24/7 nature of crypto markets, as well as the evolving threats and regulations, require more than standard security measures. It requires robust business continuity planning.

For institutions that manage significant crypto holdings, a well-defined business continuity plan (BCP) is essential for protecting crypto assets, maintaining operations, and preserving trust during unexpected disruptions and market downturns.

What is business continuity planning for crypto institutions? 

Business continuity planning is the process of creating systems of prevention and recovery to deal with potential business threats. For crypto institutions, this means ensuring that critical functions can continue and assets remain secure and accessible, even during adverse events like crypto cyber threats, system failures, regulatory emergencies, or even natural disasters.

But a crypto-specific BCP goes beyond typical IT disaster recovery. It addresses the unique characteristics of blockchain technology, private key management, and a decentralised ecosystem. Its core purpose is to minimise downtime, protect asset integrity, ensure regulatory compliance, and maintain client confidence through any crisis. Key elements typically include:

• Disaster recovery protocols: Specific plans for restoring access to wallets, private keys, and transaction capabilities.
  
  
• Risk management frameworks: Identifying, assessing, and stopping potential threats unique to crypto operations.
  
  
• Ongoing monitoring and testing: Continuously evaluating system resilience and updating plans as threats evolve.

The risks for institutional crypto assets without a BCP  

Institutional crypto assets without a comprehensive BCP are exposed to significant risks. The consequences of disruption can range from temporary operational paralysis to irreversible asset loss. Key risks include:

• Cybersecurity breaches: sophisticated hacks targeting exchanges, wallets, or internal systems can lead to theft of funds or sensitive data. Phishing, malware, and smart contract exploits remain persistent threats to this day.
  
  
• System failures: infrastructure outages, software bugs, or failures in critical third-party services (like custodians or node providers) can halt trading, prevent access to wallets, and disrupt essential operations.
  
  
• Regulatory shifts: sudden regulatory changes or enforcement actions can require immediate operational adjustments. Lack of preparedness can lead to compliance breaches, fines, and reputational damage.
  
  
• Natural disasters and human error: physical events impacting data centres or personnel, as well as internal mistakes in handling keys or executing transactions, can accidentally compromise security or access to assets.

Key components of a business continuity plan for crypto assets

A BCP anticipates the risks listed earlier in this article and provides a clear roadmap to protect digital assets. It typically incorporates the following components:

• Disaster recovery and backup systems: this requires secure, tested mechanisms for backing up and recovering private keys, wallet configurations, and transaction histories. This might involve multi-signature schemes, multi-party computation (MPC), hardware security modules (HSMs), and geographically distributed backups. CoinCover’s expertise in secure key storage and recovery provides a crucial layer here, restoring access rapidly and securely even if primary systems fail.
  
  
• Real-time risk monitoring: the dynamic nature of crypto requires constant vigilance. Integrating AI-powered risk assessment tools helps identify potential threats before they escalate. Proactive fraud detection is essential to prevent unauthorised movements of funds during periods of instability.
  
  
• Regulatory compliance: disruption doesn’t excuse non-compliance. A solid BCP incorporates procedures and tools to ensure that adherence to KYC and AML regulations continues uninterrupted. Automated compliance checks and reporting mechanisms should continue to work, particularly when manual processes are strained.

How CoinCover supports business continuity for crypto institutions

CoinCover’s specialised solutions integrate seamlessly into an institution's BCP by addressing critical vulnerabilities in the crypto asset lifecycle. Since 2018, we have built a reputation for unassailable security and reliability when it comes to digital asset protection. We help crypto institutions with:

• Real-time transaction monitoring and fraud prevention: our platform employs sophisticated detection systems to monitor transactions 24/7 in real time. It identifies and prevents theft, fraud, and unauthorised withdrawals, providing essential protection at all times.
  
  
• Secure crypto storage and recovery: we offer non-custodial wallet protection with secure, encrypted backup solutions. Our key recovery systems ensure that institutional assets can be restored swiftly and securely if access is lost due to technical failure or other unforeseen events. We protect billions in digital assets, offering demonstrable peace of mind.
  
  
• Regulatory compliance and risk mitigation: CoinCover incorporates tools designed to maintain regulatory posture, even under pressure. Our built-in features flag potentially non-compliant transactions or high-risk activities, allowing institutions to respond effectively during disruptions.

How to develop a robust business continuity plan for your crypto assets 

An effective BCP isn't just about having a document. It's about embedding resilience into your institution's operations. A robust plan requires a methodical approach that moves from understanding risks to testing an institution’s preparedness. Here’s a more detailed look at the essential steps:

1. Comprehensive risk assessment

This first step involves identifying the specific threats and vulnerabilities your institution faces in the crypto industry. Go beyond generic risks and consider scenarios unique to digital assets, evaluating both their likelihood and the potential impact of each identified risk.

• Private key compromise: what happens if keys are lost, stolen, destroyed, or held hostage with ransomware? How could internal collusion or human error lead to compromise?
  
  
• Smart contract vulnerabilities: are you interacting with or relying on DeFi protocols? What are the risks of exploits in those contracts?
  
  
• Counterparty risk: what is the operational and financial risk if a critical exchange, custodian, or infrastructure provider experiences an outage or failure?
  
  
• Network-level threats: consider risks like 51% attacks (especially for smaller cap assets), significant chain reorganisations, or major network congestion impacting transaction finality.
  
  
• Regulatory uncertainty: how could sudden regulatory enforcement or new rules targeting specific assets, activities (like staking or lending), or jurisdictions impact your operations and holdings?
  
  
• Internal threats: don't overlook risks from disgruntled employees, simple human error in transaction execution, or inadequate access controls.
  
  

2. Business impact analysis (BIA)

Once you have identified risks, BIA determines how their occurrence would affect your institution. What are your most critical business functions related to crypto assets? Examples include:

• Ability to securely sign and broadcast transactions.
• Access to wallets and portfolio monitoring systems.
• Execution of trading strategies and rebalancing.
• Meeting collateral requirements or margin calls.
• Processing client deposits and withdrawals.
• Fulfilling regulatory reporting obligations (AML/KYC, transaction monitoring).
• Maintaining communication channels with clients and stakeholders.

For each critical function, define the recovery time objective (RTO) and the recovery point objective (RPO). The RTO establishes how quickly this function must be restored following a disruption to avoid unacceptable consequences. The RPO determines the acceptable maximum amount of data loss. For example, for transaction records, the RPO might be near-zero, demanding real-time backups or high availability.

3. Tailored recovery strategies

Based on your risk assessment and BIA, design specific, actionable strategies to ensure business continuity for each critical function. This will involve planning across multiple domains:

• Technology: implement redundancy for critical systems (servers, networks, power). Use geographically distributed infrastructure. Establish secure, tested backup and recovery procedures for data, applications, and private keys. Consider failover mechanisms for essential APIs or node connections.
  
  
• Operations: define clear procedures for activating the BCP. Establish alternative methods for critical tasks (like manual workarounds if safe and feasible). Ensure that secure procedures exist for accessing backup keys or activating recovery services.
  
  
• Personnel: cross-train employees on critical BCP roles and responsibilities. Establish clear succession plans for those with unique authorities (like key holders or transaction approvers). Ensure that employees can work remotely or from alternative locations if primary offices are unavailable.
  
  
• Communications: prepare pre-approved communication templates for various scenarios targeting employees, clients, regulators, and the public. Designate official spokespeople and establish secure, reliable communication channels (primary and backup).
  
  
• Compliance: ensure that procedures are in place to maintain essential compliance functions (like KYC/AML checks and transaction monitoring) during a disruption. Plan how to preserve audit trails and communicate effectively with regulatory bodies during an incident.
  
  

4. Clear and accessible documentation

The BCP document itself must be clear, concise, and actionable. It should detail specific steps, roles, responsibilities, contact lists (internal and external), and required resources. Avoid jargon where possible, and make sure that procedures can be understood quickly under pressure.

Crucially, ensure the plan is stored securely but remains accessible during a crisis. Don't rely solely on network drives that might be down. Consider secure cloud storage and encrypted physical copies stored offsite. Ensure that key employees always have access. Maintain strict version control and update the plan documentation whenever strategies, systems, or employees change.

5. Test and refine

A plan that hasn't been tested is just a theory. Regular testing is essential to validate the BCP’s effectiveness, as well as to build muscle memory within the team. Types of tests include:

• Tabletop exercises: key stakeholders gather to walk through specific disruption scenarios ("Our primary cloud provider is down," "A key executive is unreachable," "A major hack is reported on an exchange we use"). This helps identify logical flaws, gaps in responsibility, and areas needing clarification without disrupting live systems.
  
  
• Simulations and functional tests: test specific components of the plan, such as attempting to restore wallet access from backups, failing over a critical system to its backup, or executing emergency communication protocols.
  
  
• Full interruption tests (use with caution): these simulate a real outage and are more complex, potentially involving brief, planned downtime of non-critical systems or full simulations in isolated test environments.

Testing is a learning opportunity. Document results, identify weaknesses, and feed your learnings back into the BCP. Given the rapid evolution of the crypto landscape, testing shouldn't be an annual afterthought. Aim for quarterly tabletop exercises and at least annual functional testing.

The evolving role of a BCP to future-proof your crypto assets 

As the market matures and integrates further into the traditional financial system, the demands for operational resilience will only grow. Institutions must consider the following to future-proof their strategies:

• Increased regulatory scrutiny: regulators worldwide will want more oversight of the crypto industry. This will lead to stricter requirements for operational resilience, risk management, and demonstrable asset protection. Institutions without formalised plans will face significant compliance risks.
  
  
• The rise of AI and automation: AI and automation will play an increasingly critical role in a BCP, because they offer the potential to improve the speed, efficiency, and effectiveness of institutional responses during a crisis. Use cases include predictive risk assessment, automated fraud discovery, and streamlined recovery processes.
  
  
• Emerging threats: a BCP must be prepared to address future challenges like the potential impact of quantum computing on current cryptographic standards, increasingly sophisticated social engineering attacks, new DeFi exploits, and complex cross-chain vulnerabilities. Proactive planning is essential to stay ahead of adversaries.

CoinCover provides critical support for business continuity planning. Since 2018, we have built solutions specifically designed to address the unique risks of the crypto ecosystem, solutions that can integrate seamlessly into an institution’s BCP.

Our real-time transaction monitoring and fraud prevention tools provide a vital layer of defence against theft and fraud. Additionally, our secure, non-custodial key backup and recovery systems ensure that your assets remain accessible even when primary systems fail or keys are compromised. 

Trusted by leading platforms worldwide, CoinCover provides the specialised tools and deep expertise needed to build and maintain a truly robust crypto BCP. Contact CoinCover today if you want to integrate industry-leading security, recovery, and compliance support into your business continuity strategy.