Blockstream launches HSM-based bitcoin custody with Thales

What happened

Blockstream has introduced an institutional digital asset custody product built with French technology group Thales, combining Thales hardware security modules with Blockstream's Secure Multi-Party Computation technology. The company said the system is delivered through Blockstream Enterprise and builds on a two-year relationship between the two firms. The announcement was made on Nov. 13, according to Cointelegraph and Bitcoinist.

The central design choice is where signing takes place. Blockstream says its architecture runs the full signing protocol inside the protected environment of Thales HSMs, while conventional MPC implementations may carry out portions of the process outside dedicated security hardware. The system also uses FROST, a threshold signing method that lets authorized parties jointly create a signature without rebuilding the full private key, Bitcoinist reported.

Adam Back, Blockstream's co-founder and CEO, told Cointelegraph that common MPC protocols are often too elaborate and too interactive to work well in cold storage. He argued that keeping signing devices offline can limit unauthorized access, and he said AI could make existing security problems harder to manage by helping attackers locate small implementation errors. Back described complexity as a liability for security and said returning to cold storage was his preferred approach. Jeff Boortz, Blockstream's chief product officer, said moving MPC execution into the HSM addresses important security risks, while Michael Minkevich, the company's president and chief operating officer, said financial institutions need secure and reliable infrastructure as they integrate bitcoin.

Why it matters

Custody providers are trying to reduce the number of places where private-key material or signing authority can be exposed. If signing keys remain inside sealed hardware, a compromised laptop or employee device becomes less useful to an attacker. Blockstream is presenting that hardware-first model as an alternative to custody systems that depend on connected computers. The debate matters for banks and asset managers that need custody controls comparable to the standards used elsewhere in their operations, a point raised by Blockstream's president and chief operating officer in Bitcoinist's report.

What the data shows

The reports place the launch against several concrete figures. The Binance breach involved about $6.3 billion, making it the largest crypto hack described in the reports. The Liquid Network incident involved nearly 4,000 BTC, of which 3,400 BTC were returned after the bug was fixed. Blockstream and Thales describe their collaboration as a two-year relationship. Bitcoinist also noted that spot bitcoin ETFs launched in 2024 and became top performers, drawing more Wall Street involvement, and that bitcoin was trading below $70,000 after a sharp sell-off at the time of its report.

Background

Back cited the Binance breach as an example of the risks facing internet-connected custody infrastructure. According to Binance's investigation, attackers compromised employee devices and obtained credentials that gave them access to wallet-signing systems. Bitcoinist reported that the campaign began with fake job interviews and malware planted in a coding assignment, and that a June incident involved a tampered installer downloaded by a wallet engineer. By Oct. 20, attackers had used a compromised computer and an internal AI tool to reach machines used by two more employees working on wallet infrastructure, obtaining credentials and a container deployment token. The FBI attributed the attack to North Korea, according to Bitcoinist. Blockstream has also dealt with security failures: Bitcoinist reported that its Liquid Network sidechain lost nearly 4,000 BTC through a software bug in September, with attackers returning 3,400 BTC after the flaw was patched.

What is still unclear

It is not yet clear whether the broader custody industry will move toward the specific offline, HSM-bound model Blockstream is promoting. Back said he hoped institutions would adapt by shifting assets into cold storage, but the reports do not establish how widely that approach will be adopted. The open question raised by Bitcoinist is whether high-profile breaches will push more institutions toward hardware-based custody or whether self-custody in cold storage remains the preferred answer.

What to watch

Areas to monitor include uptake of HSM-based MPC among regulated institutions, further disclosures about the Binance attack chain, and whether other custody vendors follow Thales' work with Fireblocks in keeping signing operations inside customer-owned HSMs. The reports also point to AI-assisted attack techniques as a factor that may shape custody design, though no specific future incidents or outcomes are described.

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