What Is a Custodial Wallet?
A custodial wallet is a digital wallet whose private keys are held by the service provider, such as an exchange. You, as the customer, while you can access and spend money on it, you don’t have full control of it. The service provider can stop you from moving or spending the money in the wallet if they so choose to, even though it is supposedly yours.
A Deeper Look at This Term
One of the primary strengths of blockchain is that it gives end-users full control of their money. Nobody can stop you from spending your money in a bitcoin wallet, for example. In comparison, your money in a PayPal account can be frozen by the service provider. The bitcoin wallet is, by default, a noncustodial one while the PayPal one is a custodial wallet. It is important to point out that some crypto service providers, such as exchanges, can give custodial crypto wallets, where you don’t have full control of the wallet private keys.
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