Custodial wallet

A custodial wallet is a crypto wallet where a third party controls the private keys on behalf of the user. The user is able to access the wallet through an account. The custodian is responsible for managing key storage, transaction processing, and certain recovery functions. Custodial wallets are common on crypto trading platforms because they can make trading, deposits, withdrawals, and account support easier for users who do not want to manage private keys directly. However, the user’s ability to move funds depends on the platform’s systems, policies, and custody arrangements.

A user who holds Bitcoin inside a crypto trading platform account is usually using a custodial wallet setup, because the platform manages the private keys instead of the user.
 

• A type of wallet where a third party controls the private keys.
• Users rely on a custodian, such as an exchange, for security and access.
• Provides convenience but requires trust in the custodian’s security measures.