Custodial Wallet
Also known as: Hosted Wallet, Managed Wallet, Third-Party Wallet
A cryptocurrency wallet where a third party holds and manages the user's private keys on their behalf.
A custodial wallet is a type of cryptocurrency wallet where the private keys are held and managed by a third-party service, such as a centralized exchange or wallet provider. This setup resembles traditional banking, where the user accesses their funds through the service, but does not directly control the underlying cryptographic keys. Custodial wallets offer convenience and recovery options, often making them appealing for beginners. However, they also introduce trust and security risks, as users must rely on the custodian’s integrity, technical safeguards, and regulatory compliance.