What is crypto custody?

Who holds the keys when you see Bitcoin in your account? If you use a centralized exchange, it usually isn’t you. The platform or its custody partner controls the private keys, i.e. the secret data that allows transactions to be signed. The coins stay recorded on the blockchain; they aren’t stored inside the app.

Think of a valet parking lot where you also leave your car keys. The car is still yours, but to get it back you depend on the attendant. Likewise, when you request a crypto withdrawal, the custodian reviews the request and carries out the transfer according to its terms and procedures.

A wallet with custody is called custodial. With self-custody, by contrast, you control the keys. Your platform login password isn’t your private key. It gives you access to the service, not independent control of your crypto on the blockchain.

Why it matters

Custody offers convenience: you don’t have to manage the keys yourself, and there’s often a way to recover access if you forget your password. The provider handles the technical safekeeping and may use various security systems, such as offline key storage.

On the other hand, you become dependent on a company. A hack, a withdrawal freeze or a bankruptcy can affect your access. In our view, the key question is who can move the crypto without your signature, not how easy the app looks to use.

What to watch out for

Check which company provides the custody, what the terms say about clients’ assets and which restrictions apply to withdrawals. Custody doesn’t automatically mean the provider is allowed to lend out your crypto; that depends on the agreement.

Also, don’t assume that every service has insurance or protection comparable to a bank deposit. Two-factor authentication (2FA) protects your account, but doesn’t eliminate the risk posed by the custodian itself. And self-custody carries a different burden: if your keys are lost or stolen, there’s usually no support team that can restore them.