Definition
A wallet or service that holds and manages your private keys on your behalf. You access your funds through their platform, but they technically control the assets. Opposite of self-custody.
Why It Matters
When you use a CEX like Coinbase or Binance, your crypto is custodial — the exchange controls the keys. Exchange hacks, bankruptcies, or account freezes can leave you unable to access your funds.
Example
When FTX collapsed in 2022, millions of users discovered their custodial accounts were inaccessible. Users with self-custody wallets were unaffected.
Related Terms
CEX
Self-Custody
Non-Custodial
Wallet