Crypto 101: What are custodial and non-custodial crypto wallets?
Wallets play a foundational role in crypto security and, depending on which option you choose, can often be the difference between keeping or losing funds in certain situations.
Broadly speaking, there are two main types of crypto wallet you’ll need to consider
Each option has its own advantages and disadvantages, and suits different needs depending on your investment goals, technical experience and risk tolerance.
In the latest article from the Kraken Learn Center, we break down the details of each of these wallet options so you can make a more informed decision about how you choose to keep your crypto safe. Check out one of our latest articles to get all the details you need.
The key defining characteristic between a custodial and non-custodial crypto wallet is who ultimately controls the private keys to it.
With custodial wallets, the private keys are managed by a third party. This involves placing trust in an intermediary, such as a cryptocurrency exchange like Kraken, to safely secure your funds on your behalf.
With non-custodial wallets, the responsibility of storing and securing the private keys lies solely with the wallet owner. That means, if you opt to secure your own assets, you must shoulder the burden of ensuring they’re properly stored and protected against cyber and physical threats alone.
Ultimately, when it comes to choosing between custodial and non-custodial wallets you’ll need to weigh up what’s most important to you; convenience or security.
If the former, then custodial options like holding crypto on Kraken are perhaps better suited to your needs. If the latter is more important, then a hardware wallet device or web-based non-custodial solution is likely a better option.
Have more questions about the difference between custodial and non-custodial crypto wallets? Want to learn more about the pros and cons of both options? Need more details on how to keep your crypto safe?
Check out the latest article from the Kraken Learn Center What are custodial and non-custodial crypto wallets?
These materials are for general information purposes only and are not investment advice or a recommendation or solicitation to buy, sell, or hold any digital asset or to engage in any specific trading strategy. Some crypto products and markets are unregulated, and you may not be protected by government compensation and/or regulatory protection schemes. The unpredictable nature of the cryptoasset markets can lead to loss of funds. Tax may be payable on any return and/or on any increase in the value of your crypto assets and you should seek independent advice on your taxation position.