Where to Keep Cryptocurrency: A Guide to Storing Digital Assets

You have just bought your first Bitcoin or Ethereum. You can see your balance in an app and it feels like the money is stored there. It is not sitting in a physical vault, and it is not really saved as a simple file on your phone.

When you hold cryptocurrency, what you actually control is a cryptographic code called a private key. This key lets you authorise transactions on the blockchain. If you control the key, you control the funds. If you lose the key or someone else gets it, the funds can be lost or moved without your consent.

So the real question is not where to store your crypto, but how you choose to manage and protect your private keys.

The two main storage methods

There are two main approaches to storing cryptocurrency: managing the keys yourself (self-custody) or using a professional service to manage them for you (third-party custody).

1. Third-party custody (custodial wallets)

This is the method that many new users start with. When you buy crypto on a centralised exchange and leave it there, you are using a custodial wallet.

It works in a similar way to a traditional bank account. You do not keep the cash in your home, the bank holds it for you. In the same way, the exchange or custodian holds the private keys, and you access your account using a username, password, and often additional security such as two-factor authentication.

• Convenience
  The experience is familiar. If you forget your password, there is usually a recovery process through customer support or automated tools. The interface often looks like standard online banking or a finance app.

• Liquidity
  Your assets are usually available for trading or conversion at short notice. If you are an active trader, or you move between different crypto-assets or into euro (EUR) or other currencies frequently, this can be useful.

• Institutional-grade services
  Larger investors, such as companies or funds, may use regulated or specialised custodians. Many of these use advanced security techniques such as Multi-Party Computation (MPC). MPC splits a private key into several parts, stores them on separate devices or in separate locations, and requires multiple parts to approve a transaction. This reduces the risk that a single person or device can move funds without proper approval.

You should always check what legal protections, licences, and policies apply to any custodian you use.

2. Self-custody (non-custodial wallets)

Self-custody means you are the only one with access to your private keys or your recovery phrase. This matches the well-known saying in crypto: “Not your keys, not your coins.”

• Control
  You decide how and when to use your funds. You do not need to rely on opening hours, payment networks, or a support team to approve transfers. As long as the network is working and you pay the required fees, you can send or receive crypto.

• Reduced counterparty risk
  If an exchange or custodian fails, is hacked, or becomes insolvent, funds you keep in your own wallet are not directly exposed to that event. They are held on the blockchain in addresses you control. This does not make you risk-free, but it reduces the risk linked to a single company.

• Responsibility
  There is usually no account recovery or “forgot my password” option. Most non-custodial wallets give you a recovery phrase (often 12 to 24 words) when you set them up. Anyone with that phrase can restore the wallet and control the assets. If you lose it and cannot access your wallet, in most cases the funds cannot be recovered.

Self-custody can be powerful, but it requires careful handling and good basic security habits.

Real-life examples of storage solutions

The tools you use will depend on whether you choose self-custody, third-party custody, or a mix of both.

Hot wallets vs cold wallets

If you choose self-custody, you will usually decide between hot storage and cold storage.

• Hot wallets (software)
  Hot wallets are connected to the internet. Common examples include apps like MetaMask or Trust Wallet that you install on your phone or browser.

  They are convenient for everyday use, paying with crypto, or interacting with decentralised applications (dApps). Because they are online, they can be more exposed to malware, phishing websites, or other remote attacks. Keeping only smaller, frequently used amounts in a hot wallet is a common approach.

• Cold wallets (hardware or offline storage)
  Cold wallets keep your private keys offline most of the time. Popular examples include hardware devices such as Ledger or Trezor. These devices often look like a USB stick and are designed so that your private keys never leave the device, even when you connect it to a computer or phone to approve a transaction.

  Many people see cold wallets as a strong option for long-term storage of larger amounts, rather than for everyday spending. You still need to protect the device and the recovery phrase. If both are lost or destroyed, you will not be able to access your crypto.

Some users also use fully offline paper backups or metal seed plates where the recovery phrase is written or stamped. These are another form of cold storage.

Institutional custodians

Companies, investment funds, and exchange-traded product or ETF issuers often have extra legal and operational requirements. For example, they may need clear internal controls, separation of duties, and specific audit trails. In these cases, using a simple hardware wallet alone is usually not suitable.

Institutional custodians, such as Anchorage Digital, BitGo, or Coinbase Prime, provide services designed for organisations. They may:

• store key material in multiple secure facilities, often in separate regions
• require several approvals for larger transactions
• apply internal rules, for example, that moving more than the equivalent of 100 000 EUR requires digital signatures from several senior staff

These services are often subject to regulation in one or more jurisdictions. Firms using them should check how assets are held, what legal ownership structure is used, and what happens in the event of a custodian failure.

Risks and red flags

No storage method is completely risk-free. The types of risk are just different.

The limits of insurance

Many people assume crypto platforms are insured in the same way as bank deposits. In most cases they are not. Bank savings in the EU are usually covered up to a set limit by state-backed schemes. Crypto-assets typically do not benefit from such guarantees.

Some reputable custodians and platforms may hold private insurance that covers specific events, for example, theft from cold storage or physical damage to facilities. These policies usually:

• have coverage limits, which means that in a very large incident the total loss could be greater than the insurance payout
• contain exclusions, for example, losses caused by user mistakes, poor passwords, or sharing information with scammers

Insurance is one risk control, not a complete safety net. Always read the terms and conditions carefully and check what is actually covered.

Security best practices

Regardless of whether you use self-custody, third-party custody, or a mix of both, some simple habits can help reduce risk.

• Secure your recovery phrase
  If you use a non-custodial wallet, treat your recovery phrase like the master key to your assets. Do not store it in screenshots, email, cloud storage services, or messaging apps. Instead, write it down clearly and keep it in a secure, private place. Some people use fireproof or waterproof metal plates for extra durability.

• Protect devices and accounts
  Keep your devices updated with the latest security patches. Use strong, unique passwords and a password manager. Activate two-factor authentication (2FA) wherever possible, especially on exchanges and email accounts linked to your crypto activity.

• Watch for phishing and scams
  Scammers often create fake websites, social media profiles, or emails that look similar to real services. Always check the full URL and, if possible, use bookmarks for sites you trust. No legitimate support team should ever ask you to share your private key or recovery phrase.

• Consider spreading your storage
  If you hold a larger amount of cryptocurrency, you may decide not to keep it all in one place. For example, you might hold a smaller amount on an exchange for regular trading, and keep the majority in a hardware wallet that you rarely connect. Spreading risk in this way will not remove it entirely, but it can help limit the impact of a single incident.

Summary

Choosing where to keep your cryptocurrency is mainly about balancing convenience, cost, and control.

For users who prefer a simple, familiar experience or who trade frequently, a regulated or reputable third-party custodian can be practical. You gain ease of use and support options, but you rely on the provider’s security and financial strength.

For users who care strongly about independence and are comfortable handling their own security, self-custody using a hardware wallet is a common option for long-term storage. It removes some counterparty risks, but it puts more responsibility on you to protect keys and recovery phrases.

Many people use a mixture of both, depending on their needs. There is no single “best” method for everyone, only the method you can manage safely and consistently.