How a cold wallet works
The keys live on an offline device: a hardware wallet, a hardware security module in a vault, or a computer with no network connection, described as air-gapped. An online system prepares the unsigned transaction, which is carried to the offline device by QR code, USB drive or a dedicated cable.
The device signs and hands back only the signature, which the online system broadcasts. The address can receive deposits at any time, since receiving needs no key.
How exchanges and custodians use cold storage
An operator keeps most customer assets cold and a small working float in a hot wallet that pays day-to-day withdrawals. When the float runs low, staff refill it from cold storage under a set procedure:
- Several approvers, often through multisig or MPC, in separate locations
- Transfers only to pre-approved addresses, usually the operator's own hot wallet
- Scheduled signing sessions, logged and reviewed
- Backups of key material, stored apart and tested
What cold storage does not solve
Offline keys can still be lost, destroyed, stolen physically or misused by insiders, and a signer can be tricked into approving the wrong transaction.
EU law does not name hot or cold wallets. The duty sits in MiCA's custody rules, which ask for a custody policy that minimises the risk of losing clients' crypto-assets or the means of access to them.
Cold wallet, hot wallet or hardware wallet?
- Hot wallet
- Keys are online and sign automatically. Fast, and exposed to remote attack.
- Hardware wallet
- A consumer device that keeps keys offline: one way of making a cold wallet, not another word for it.
Where a cold wallet shows up in a platform
Modules that do the work
- Custody & walletsWallets on every major chain, with MPC custody from leading providers or your own keys.
- BackofficeOne console to run the platform: customers, money, risk, content and staff permissions.
- LedgerThe double-entry book of record behind every balance, fee and transfer.
Platforms that need it
Guides that go deeper
Where it is written
The laws and standards this page's facts come from.
General information, not legal advice: what applies to you depends on your services and your market.