Where to Keep Cryptocurrency: A Guide to Storing Digital Assets

You just bought your first [Bitcoin])https://www.coinjar.com/au/buy/bitcoin) or Ethereum. You can see the balance in your app, but it is natural to wonder where that money actually is.

It is not sitting in a physical vault, and it is not simply saved as a file on your phone. Your cryptocurrency exists on a blockchain, and what you really “own” is access to it.

When you own cryptocurrency, you are really in control of a secret code called a private key. This key authorises you to move funds on the blockchain.

If you have the key, you control the money. If you lose the key, there is usually no way to recover it and the funds are effectively gone.

So the question of where to store crypto is really about how you choose to manage and protect those private keys.

The Two Main Storage Methods

There are two main ways to store cryptocurrency:

1. You manage the keys yourself (self-custody).
2. A professional service manages them for you (third-party custody).

1. Third-Party Custody (Custodial Wallets)

This is the path most new investors take. If you buy crypto on a centralised exchange and leave it there, you are using a custodial wallet.

Think of it like a bank account. You do not hold the cash yourself, the bank does. With crypto, the exchange or custodian holds the private keys and gives you a username and password so you can view and use your balance.

• Convenience
  The experience feels similar to internet banking. If you forget your password, you can go through a recovery process with customer support.

• Liquidity
  Your assets are ready to trade straight away. This is useful if you buy and sell frequently, or if you want to move quickly when markets change.

• Institutional-grade storage
  Large investors, such as funds or listed companies, often use “qualified custodians”. These services may use techniques like Multi-Party Computation (MPC), which splits a private key into several parts and stores them on different devices or in different locations. That way, no single person can move funds on their own.

For many Australians who are just starting out, a reputable, regulated exchange or custodian can feel like the least stressful option.

2. Self-Custody (Non-Custodial Wallets)

Self-custody means you alone control your private keys. No exchange, no bank, no intermediary. This lines up with a well-known crypto saying: “Not your keys, not your coins.”

• Control
  You decide when and where to move your cryptocurrency. You do not need to wait for business hours or ask anyone for permission.

• Protection from third-party failure
  If the exchange where you bought your coins is hacked, freezes withdrawals or goes bankrupt, self-custodied assets are separate. Your funds sit in a wallet you control, not on the exchange’s balance sheet.

• Responsibility
  The trade-off is that there is no help desk if something goes wrong. Your wallet will give you a recovery phrase, usually 12 to 24 words. This is the ultimate backup for your private keys.

  If you lose that phrase, or someone else gains access to it, there is no way to fix it. Your bank cannot reverse a blockchain transaction and there is no “forgot my password” option for a lost recovery phrase.

Real-life examples of storage solutions

Once you choose between self-custody and third-party custody, the tools you use will look quite different.

Hot Wallets vs Cold Wallets

If you choose self-custody, you will typically decide between hot storage and cold storage. Many people use a mix of both.

• Hot wallets (software)
  These are apps that stay connected to the internet, such as MetaMask or Trust Wallet. You can install them on your phone or computer and use them to send and receive crypto or interact with decentralised apps (dApps).

  Hot wallets are very convenient for everyday activity. However, because they are online, they can be more exposed to malware, phishing and other cyber threats if you are not careful.

• Cold wallets (hardware)
  These are physical devices, such as Ledger or Trezor, that store your private keys offline. They often look like a small USB stick or key fob.

  The device signs transactions internally so your private keys never leave it, even when it is plugged into a computer. Keeping keys “air-gapped” in this way is widely seen as the gold standard for personal security, especially for larger, long-term holdings.

Many Australians choose to keep a small amount in a hot wallet for daily use, then store the rest in a hardware wallet that rarely goes online.

Institutional Custodians

For organisations like super funds, listed companies, hedge funds or ETF issuers, storing crypto on a USB stick is usually not acceptable. They must meet strict regulatory, audit and risk requirements.

These entities tend to use institutional custodians. These firms specialise in holding large amounts of digital assets on behalf of clients.

They might store keys inside secure facilities in multiple countries, sometimes in vaults or bunkers, and they often require several approvals before any transaction can go through.

For instance, a fund could set a rule that moving more than AUD $150,000 requires digital signatures from the CFO plus two other authorised managers. This kind of structure is designed to reduce both operational mistakes and insider fraud.

Risks and Red Flags

No matter where you keep your crypto, you are exposed to some risks. The goal is to understand them and put sensible protections in place.

The limits of insurance

Many people assume that crypto exchanges are insured the same way as Australian bank accounts. This is usually not true.
Reputable custodians often hold private insurance that may cover certain events, such as theft or physical damage to cold storage facilities. That sounds reassuring, but there are a few catches.

Policies usually have limits. If there is a very large loss, the total claim amount might not be enough to fully repay every customer.

Insurance will also normally only cover specific types of incidents, such as an external hack or employee fraud that can be clearly proven. It almost never covers losses caused by user mistakes, for example if you:

• hand over your password or 2FA code to a scammer,
• sign a malicious smart contract, or
• send funds to the wrong address.

So insurance is a backstop, not a safety net you can rely on for everything.

Security best practices

A few simple habits can dramatically improve your chances of keeping your crypto safe.

• Secure your seed phrase
  If you use self-custody, never store your recovery phrase in plain text on a computer, in your email, on your phone or in cloud services like Google Drive or iCloud. These can be hacked.

  Instead, write the words on paper or use a metal backup plate, then store it in a safe place, such as a home safe or bank safety deposit box. Consider making two copies and keeping them in separate secure locations.

• Watch for phishing
  Scammers regularly create fake websites, emails or social media accounts that look almost identical to major exchanges or wallet providers. Their goal is to trick you into typing in your password, 2FA code or seed phrase.

  Always double-check website addresses, bookmark official sites and avoid clicking links in unsolicited emails or messages. No legitimate service should ever ask you to reveal your recovery phrase.

• Diversify storage
  If you hold a meaningful amount of cryptocurrency, it can be sensible to spread the risk. For example, you could:

  • keep a small amount on a centralised exchange for quick trading (hot storage), and
  • store the majority in a hardware wallet that you rarely connect (cold storage).

  Some advanced users also use multi-signature wallets. Some split holdings across more than one custodian.

Summary

Choosing where to keep your cryptocurrency is mainly a balance between convenience and control.

If you are an active trader, or not very confident with technology, a reputable third-party custodian can provide a familiar, bank-like experience with support and basic recovery options.

If you are a long-term holder and you are willing to take on more responsibility, a self-custodied hardware wallet is generally considered one of the safest ways to store larger amounts.

The best approach is the one you can manage reliably. It should match your technical comfort level, the size of your holdings and how often you need to move funds.

As of early 2026, cryptocurrency regulations in Australia continue to evolve with the recent introduction of the Corporations Amendment (Digital Assets Framework) Bill 2025 in November 2025. This legislation aims to require many crypto platforms and custodians that hold client assets to obtain an Australian Financial Services Licence (AFSL) from ASIC, imposing tailored obligations around custody, governance, and consumer protections to align the sector more closely with traditional financial services standards.

The Bill is currently progressing through the legislative process. If passed, it will require crypto exchanges and custody providers to hold an Australian Financial Services Licence and meet new obligations for holding and safeguarding client assets.

This ongoing transition reinforces the value of choosing reputable, regulated exchanges and custodians, as the new framework is designed to enhance safeguards for Australian investors without immediate disruption to existing services. Staying informed through official ASIC and Treasury updates remains essential as these changes take effect.