Some large, reputable CEXs may even offer some type of deposit insurance for users’ funds-though this certainly isn’t always the case. Depending on the company’s location and jurisdiction, it may be legally required to follow certain laws and regulations intended to protect users and their funds. Although less common today, hackers have stolen billions from CEXs, which is why it’s essential to do your research. Regulatory and security measuresīefore choosing a custodial crypto wallet, you should consider each platform’s security and regulatory compliance. You won’t even need to download any additional software, unless you want to install a CEX’s mobile app on your phone-in which case the process is, again, very familiar.Ĭompared to hardware wallets, and other types of non-custodial wallets, CEXs are arguably much easier to use. You won’t need to buy any extra hardware, or download any programs like browser extensions. The entire process feels much like checking out on any e-commerce platform. You create an account using an email address and a password, and buying crypto is usually as simple as connecting a bank account, or using a debit or credit card. CEXs generally enable users to buy crypto (with fiat currency) using a familiar process. These wallets, provided by centralized crypto exchanges (CEXs), provide an easy onboarding experience for crypto newcomers. Most people get started with crypto using a custodial crypto wallet. What’s a custodial crypto wallet, and why should I consider using one?Ĭustodial crypto wallets have a few key advantages and disadvantages compared to their non-custodial counterparts. If you’re looking to set up a non-custodial crypto wallet, refer to our other guide instead. In this article, we’ll provide a step-by-step guide to setting up a custodial crypto wallet. With a custodial wallet, a centralized authority (like a centralized crypto exchange) controls your private keys, providing custody over your assets.īefore proceeding, understand the difference between custodial and non-custodial wallets, and the benefits of each to decide which is right for you. With a non-custodial wallet, you remain in control of your wallet’s private keys. The first major distinction between crypto wallets is whether they’re custodial or non-custodial. The public key generates an address that lets you receive crypto, while the private key allows you to send or spend crypto from the same address. There are several different types of crypto wallets, but their core functionality is the same: Every crypto wallet contains a public and private cryptographic key pair, similar in function to a bank account number and PIN. Just as regular bank accounts keep your cash safe, crypto wallets keep your digital currency secure. If you decide to buy crypto, you’ll first need a crypto wallet.
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