How self-custody works
The owner runs a wallet, as an app, a browser extension or a hardware device, that generates the keys and keeps them locally. The wallet's maker supplies software and never holds the keys, so it cannot sign for the user.
Backup is the owner's job, usually a seed phrase written down and stored offline. Variants spread the risk: multisig among several devices or people, or key shares split by multi-party computation.
How EU rules treat self-custody
Recital 83 of MiCA says that hardware or software providers of non-custodial wallets should not fall within the regulation's scope. Custody, which does need authorisation, is safekeeping or controlling crypto-assets, or the means of access to them, on behalf of clients.
The EU's Transfer of Funds Regulation calls an address not linked to a crypto-asset service provider, or to a similar entity outside the EU, a self-hosted address. For a transfer above EUR 1,000 to or from one, the provider takes adequate measures to assess whether its own customer owns or controls the address.
Why self-custody matters to a regulated product
Customers of an exchange or an on-ramp often withdraw to their own wallets, so the product needs address checks, ownership checks and screening at that point. A product that is itself non-custodial carries less regulatory weight, but only if its provider truly cannot sign alone.
Self-custody or custodial wallet?
- Custodial wallet
- The provider holds the keys and the customer has a claim on a balance. Access can be restored after a lost password, and the provider can fail or be hacked.
- Embedded wallet
- Created inside an app, with no seed phrase to write down. It is self-custodial or not depending on who can produce a signature.
Where Self-custody 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.
- Compliance reportingTransaction monitoring, the Travel Rule and regulatory reports, ready for your regulator.
Platforms that need it
Guides that go deeper
Where it is written
The laws and standards this page's facts come from.
- Regulation (EU) 2023/1114, MiCA, Article 3 and recital 83 (EUR-Lex)
- Regulation (EU) 2023/1113, the Transfer of Funds Regulation, Articles 3, 14 and 16 (EUR-Lex)
General information, not legal advice: what applies to you depends on your services and your market.