Hardware Security Module (HSM)

A Hardware Security Module (HSM) is a purpose-built, tamper-resistant device for generating, storing, and using cryptographic keys. Unlike general-purpose servers or software libraries, an HSM provides a hardened boundary with both physical and logical protections, ensuring that private keys never leave the device in plaintext. All sensitive operations, such as transaction signing or decryption, take place inside the secure enclosure.

HSMs have been the backbone of digital trust in industries such as banking, payments, government, and certificate authorities for decades. In cryptocurrency custody, they provide the security anchor that enables institutional-grade key protection, strong policy enforcement, and compliance with strict regulatory standards.

Key Characteristics

Tamper resistance

HSMs are engineered with protective meshes, epoxy coatings, sensors, and active countermeasures that detect probing or fault injection. When tampering is detected, the device automatically zeroizes sensitive material, erasing secrets to prevent compromise.

True Random Number Generation (TRNG)

Keys are generated using hardware entropy sources that produce truly random numbers. Continuous health tests monitor the output of the TRNG, ensuring that randomness remains unbiased and reliable.

Isolated cryptographic execution

All cryptographic operations such as signing, decryption, or key derivation are executed inside the HSM. By keeping private keys within the secure boundary, the device prevents exposure to host memory, disk, or application software.

Access control & roles

Role-based access ensures separation of duties between administrators, operators, and auditors. Strong authentication, often with multiple factors, is required for sensitive administrative functions.

Policy enforcement

HSMs enforce security policies directly in hardware, such as quorum approvals, dual control, usage restrictions, and time-based access windows. These constraints prevent unauthorized use of keys, even by privileged insiders.

Performance & scaling

Dedicated cryptographic accelerators allow HSMs to process large volumes of asymmetric and symmetric operations quickly. Clustering and partitioning enable scaling for high throughput and multi-tenant isolation.

Security Standards & Assurance

FIPS 140-3 (Level 3 or higher)

This U.S. government standard validates cryptographic modules for tamper resistance, role separation, and identity-based authentication. Compliance with FIPS 140-3 establishes trust for institutional and regulated environments.

Common Criteria (EAL4+)

Independent evaluations of the device’s security functions and development processes provide additional assurance. Common Criteria certifications are widely recognized internationally.

PCI HSM (payments)

In payment systems, PCI HSM certification ensures PIN protection and secure processing of cardholder data. These requirements have become the global baseline for financial transaction security.

Operational controls (hosting)

HSMs are deployed in SOC-2–compliant datacenters with strict access controls, monitoring, and auditing. This ensures that physical security and operational practices complement the hardware protections.

Core Functions

Key generation

HSMs generate keys internally using their built-in True Random Number Generators (TRNGs). This guarantees that the cryptographic material is created with high entropy and free from predictable patterns. The keys are never exposed in plaintext outside of the device during or after generation. This process removes the risk of weak randomness or software-based key creation, which could otherwise undermine the entire security system. By ensuring that keys are born inside trusted hardware, institutions can have confidence that their cryptographic foundations are uncompromised from the very beginning.

Key storage

Once generated, keys are securely stored inside the HSM under device master keys. The storage is encrypted at rest within tamper-resistant memory, ensuring that even if the hardware is stolen, the keys cannot be extracted or reconstructed. Extraction is disallowed or strictly controlled through cryptographic wrapping mechanisms, requiring quorum approval or multi-party authorization. This prevents administrators, insiders, or attackers from ever gaining direct access to private keys while still enabling secure backup and restore procedures under tightly managed conditions.

Cryptographic operations

Digital signatures, encryption and decryption, key exchanges, hashing, and key derivations are executed entirely within the secure boundary of the HSM. Applications interact with these functions through APIs, but the key material itself never leaves the device. This model ensures that cryptographic functions remain trustworthy and resistant to software compromise, malware, or memory scraping.

Key lifecycle management

Throughout their lifecycle, keys can be rotated, archived, destroyed, or backed up, all under strict security controls. When backups are necessary, they are encrypted and authenticated, often requiring split knowledge or quorum control to restore. This ensures no single operator can compromise key material. Regular lifecycle operations extend the long-term security of the system and keep cryptographic practices aligned with compliance and industry standards.

Policy enforcement

HSMs can enforce sophisticated policies at the hardware level. Examples include requiring quorum approvals for signing operations, restricting the number of operations per time window, limiting which algorithms or key sizes can be used, or binding usage to specific contexts. Because these rules are implemented directly inside hardware, they cannot be bypassed or tampered with by compromised host software.

Auditability

Every administrative and cryptographic action performed on the HSM can be logged in a tamper-evident manner. These logs provide accountability for operators, traceability for forensic analysis, and verifiable evidence for regulatory compliance. Institutions can review these logs to ensure that key material is being used correctly and only under authorized workflows.

HSMs in Cryptocurrency Custody

Private key protection

Keys never leave the HSM in plaintext, protecting them from malware, insider attacks, or memory scraping. This makes HSMs the anchor of secure custody, where key secrecy is paramount.

In-HSM signing

Transactions are signed directly within the HSM. Since key material is never exposed to application memory, the attack surface is drastically reduced, ensuring that even compromised software cannot leak or misuse private keys.

Threshold & approval workflows

HSMs can enforce multi-approval requirements such as 2-of-3 or 3-of-5 authorizers before a signature is released. This ensures that no single individual can unilaterally authorize transfers, providing robust governance and preventing fraudulent activity.

Integration with MPC

HSMs can serve as one component of a broader Multi-Party Computation scheme. In this setup, the HSM holds one share of a key, while another share is controlled by the client. Signing requires cooperation across parties, ensuring that no single system or organization ever controls the entire private key.

Threat Model (HSM-Relevant) & Mitigations

How Secubit Uses HSMs

Secubit uses HSMs as the hardware root of trust in its custody platform. Keys are generated with strong entropy inside the HSM, remain confined within secure hardware, and are subject to strict policy enforcement. In custodial mode, Secubit stores the complete key in its HSMs and enforces quorum approvals before any signing operation is released. In non-custodial or hybrid mode, the HSM holds one share of a cryptographic key as part of an MPC scheme, while clients hold the other share. This design ensures that no single party, insider, or attacker can compromise the custody arrangement. By combining HSMs with modern authentication like Passkeys, Secubit can deliver both custodial and self-sovereign wallets, offering institutional-grade security without sacrificing flexibility.