How an embedded wallet works
The app calls a wallet provider's SDK or API when a user registers. A key is generated in the background, and the user sees a balance and a send button, not an address format or a recovery phrase.
The key is usually protected in one of three ways:
- Split into shares by multi-party computation, held by the user's device and the provider
- Generated and kept in a secure enclave or hardware security module on the provider's side
- Encrypted on the device and unlocked with a passkey or biometrics, with an encrypted backup
Embedded wallets and custody rules
In the EU, MiCA defines custody as safekeeping or controlling, on behalf of clients, crypto-assets or the means of access to them, such as private keys. A provider that can move a user's assets alone is on that side of the line, and custody is a service that needs authorisation as a CASP.
Recital 83 of MiCA says that hardware or software providers of non-custodial wallets should not fall within the regulation's scope. Where an embedded wallet sits depends on its key design.
Who uses an embedded wallet
Card apps, on-ramps, stablecoin checkouts, games and marketplaces: products whose users want to hold or spend crypto-assets without learning how wallets work.
Embedded wallet or wallet as a service?
- Wallet as a service
- The infrastructure a company rents to create and operate wallets through an API. An embedded wallet is what the end user gets from it, inside the app.
- Custodial wallet
- The provider holds the keys outright and the user has a claim on a balance. An embedded wallet can be custodial or self-custodial, depending on who can sign.
- Standalone wallet app
- A separate product the user installs and connects to each app, with a seed phrase the user keeps.
Where an embedded 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.
- AuthenticationSign-in, passkeys and second factors for customers and staff, on your identity provider or ours.
Platforms that need it
Guides that go deeper
- White-label crypto banking: the software, the two licences and who holds whatHow a crypto banking app works: an IBAN account, crypto wallets, conversion and a card, the two licences behind them, who holds the money and the coins, and SaaS, API or source code.
- How to build a crypto card app like RedotPayHow a stablecoin card really works: what happens between the tap and the answer, how the crypto is converted and held, what each module does, and the licences on each side.
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.