Custodial

A custodial arrangement is one in which a third party, such as an exchange or wallet provider, holds and controls the private keys to a user’s crypto assets on their behalf. The user accesses funds through an account, and the custodian is responsible for security, record-keeping, and processing withdrawals. This can simplify use and recovery but means users rely on the provider’s solvency and safeguards.

A common misconception is that assets in a custodial account are always fully segregated and instantly withdrawable; access depends on the custodian’s policies, financial health, and any legal or technical restrictions that may apply.