Digital Asset Management Challenges & How to Overcome Them
If you are a financial advisor, business, or investment fund that actively invests in crypto, then it is imperative to have a digital asset management (DAM) strategy in place in order to manage things efficiently.
However, digital asset management does come with its challenges, and failure to acknowledge and rectify these can bring about some damaging and uncomfortable situations, which, if left unchecked, can even jeopardise one's entire crypto portfolio. For this reason, being aware of the challenges that are most likely to occur can be the difference between thriving in this exciting industry or drowning in it.
This article will, therefore, act as an evergreen resource by highlighting 6 of the most likely challenges to arise in digital asset management, how to overcome them best, and an innovative solution that can limit challenges altogether.
In this article, we’ll have a look at:
- Why is Digital Asset Management (DAM) Important?
- 6 Potential Challenges in Digital Asset Management [& Solutions]
- Remove Digital Asset Management Stress With ICONOMI Wealth
Let's dive right in!
Why is Digital Asset Management (DAM) Important?
Digital asset management is an indispensable part of high-level cryptocurrency investing, and there are a few reasons why.
For one, DAM ensures that digital assets are highly organised and accessible, which in turn allows businesses and investors to make swift and informed decisions. This is especially important given how volatile crypto markets can be, so access to timely and accurate asset data can significantly impact investment outcomes.
DAM also helps to mitigate risks associated with security breaches and unauthorised access. By centralising digital assets on one dashboard, DAM platforms provide enhanced security features that commonly include strong encryption and multi-factor authentication, and these are fundamental for protecting sensitive information against cyber attacks. This is even more important as an operation grows, as the sophistication and amount of transactions will often bring about increased exposure to security vulnerabilities.
Furthermore, an effective DAM can reduce the time and resources spent on managing assets manually. This not only cuts costs but also allows businesses, financial advisors and funds to focus more on strategic decision-making, as opposed to spending their time manually conducting administrative tasks. So, implementing a solid DAM strategy can also help scale one's crypto operations.
6 Potential Challenges in Digital Asset Management [& Solutions]
We've established why digital asset management is important, so it's now time to go over the common challenges that can potentially hinder crypto investing operations.
Below are six potential challenges that are most likely to arise and solutions you can enact to counter them:
1) Consistency and quality
Challenge: Managing a large amount of cryptocurrencies across different platforms can sometimes lead to discrepancies in asset valuation, performance metrics, and reporting. These inconsistencies can make it difficult for investors to make informed decisions and for businesses to provide accurate reports to stakeholders.
Solution: One solution can be to implement (or create) a robust data validation and/or synchronisation tool that ensures that data is aligned across all platforms. Such a centralised data management system that aggregates information from all used platforms will help to maintain consistent data.
What's more, given how AI is being used in more platforms, it's quite possible to implement a proprietary tool that ensures up-to-date accuracy of all crypto assets and automatically detects discrepancies and rectifies them.
2) Security and compliance
Challenge: Another challenge that could arise when conducting DAM is protecting digital assets from unauthorised access and ensuring your operations are compliant with relevant laws like GDPR and CCPA. These challenges can arise due to the decentralised and nascent nature of crypto. Although it has benefits, this means that security is more down to the individual, and regulatory stances on crypto can be quite ambiguous and more suspicious than normal.
Solution: To counter these two challenges, you should employ robust security measures, including encryption and access controls. More information on best security practices can be found here.
What's more, conducting regular audits and compliance checks of your operations via an accredited audit firm can also bring about further assurances and can be the evidence that regulators need to guarantee that your operations are legal and compliant.
3) Collaboration and integration
Challenge: Collaboration and integration pose unique challenges due to the decentralised nature of crypto and blockchain, as well as the variety of platforms used to manage digital assets. This is further complicated when you take into account the number of different stakeholders that are normally involved in DAM, including compliance officers, IT staff, financial advisors, and external partners, most of whom will often need to interact with the same data but from different domains and in different ways.
Solution: You can create your own internal DAM software platform, but it will take time, money and expertise to build. The good news is that there are existing DAM systems that have features like access control, version control, and real-time collaboration tools and which operate on an affordable subscription or fee model. It is advisable to sign up for one of these rather than make your own.
4) Scalability and performance
Challenge: Scalability and performance are essential facets of an effective digital asset management operation, but as portfolios grow and transaction volumes increase, the DAM system can potentially falter due to being overwhelmed by heightened demands. This challenge becomes particularly acute during market peaks when prompt asset access and decision-making are crucial.
Solution: To ensure there are no issues, it is recommended to adopt cloud-based DAM solutions that offer scalable storage and performance optimisation features. This can be further enhanced by on-chain storage solutions like Arweave.
Moreover, integrating edge computing can significantly boost system performance for users spread across different geographical locations. By processing data closer to the end-user, edge computing reduces latency, thereby improving load times and ensuring that the DAM system is responsive even during periods of intense activity.
5) Transition and adoption
Challenge: Switching to a sophisticated DAM system can be a significant undertaking, especially if you want to ensure smooth adoption and operational continuity. The primary challenge here is resistance to change (especially for traditional finance professionals) and the technical complexity involved when transitioning systems.
Solution: To facilitate a smooth transition, it is crucial to engage with all stakeholders early in the process. And the best way to do this is by providing comprehensive training and clear documentation on the benefits and functionalities of the new system. Running pilot tests that allow users to interact with the DAM system in a controlled environment can also prove beneficial, as gathering feedback during these tests can help address concerns and refine the system before full-scale implementation.
6) Asset discovery and organisation
Challenge: As financial advisors, businesses, and investment funds deepen their engagement with digital assets, the number of assets under management can grow exponentially. Whilst a sign of an active operation, efficiently organising and retrieving digital assets also becomes much more difficult.
Solution: Implementing a robust metadata strategy is the solution, where each asset is tagged with comprehensive and accurate metadata, making it easily searchable. Utilising AI-driven tools for automated tagging and categorisation can also drastically improve efficiency and accuracy in asset discovery.
Remove Digital Asset Management Stress With ICONOMI Wealth
Although the aforementioned DAM solutions are valid, they require a considerable amount of effort and resources to be executed effectively. The good news is that there are platforms that financial advisors, businesses, or investment funds can sign up to that encompass digital asset management functionality.One prime example is ICONOMI Wealth, which streamlines digital asset management by providing a centralised account for all your crypto needs, including leveraging various different crypto strategies, consolidating holdings across multiple exchanges, automating portfolio rebalancing, and leveraging robust security features – all from a single, user-friendly dashboard.
ICONOMI Wealth tackles the challenges of DAM with:
1) A unified platform
Manage all your crypto assets in one place, eliminating the need to juggle multiple exchange accounts and logins. Access real-time market data and track portfolio performance with a consolidated view.
2) Enhanced security
Benefit from industry-leading security practices like segregated cold storage solutions with a dedicated SLA and multi-factor authentication to keep your assets safe. ICONOMI's secure custody solution minimises third-party risk.
3) Streamlined compliance
ICONOMI adheres to KYC/AML regulations and assists with investor onboarding, saving you time and resources. Onboard new clients efficiently and ensure regulatory compliance with built-in tools.
4) Automated tools
Reduce manual workload with portfolio rebalancing automation and smart trading algorithms designed to optimise entry and exit points. Free up your time for strategic decision-making while ICONOMI handles the heavy lifting.Conclusion
As can be seen, implementing a robust DAM strategy is not just a nice-to-have but a necessity for anyone serious about cryptocurrency investing. Thankfully, there are readily available things you can do in order to counter these challenges, and if you're looking to simplify your digital asset management and safeguard your investments, consider exploring platforms that consolidate these functions into a single, user-friendly solution like ICONOMI Wealth.
So don't let the challenges overwhelm you—take proactive steps today to secure and optimise your digital asset strategy! This all starts by assessing your current DAM practices, and exploring various innovative solutions on offer, and seeing which one's best suits your needs.
Best of luck with your digital asset management journey!
If you enjoyed this article, you may be interested in our other titles:
5 Must-Have Books For Crypto Investing in 2024
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Is Crypto Halal or Haram? A Guide For Muslim Investors [2024]A Guide For Long-Term Crypto Investing [2024]
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