GlossaryIntermediate
Custody Risk
The risk that a third party holding your crypto fails, is hacked, or restricts access.
Custody risk is the risk associated with relying on a third party, such as an exchange or other custodian, to hold cryptocurrency on your behalf, rather than holding it yourself.
This can include the custodian being hacked, becoming insolvent, freezing withdrawals, or otherwise restricting a user's access to their own funds.
Examples
- Funds held on an exchange are subject to that exchange's own custody risk, separate from the underlying asset's own risks.
- Self-custody removes custody risk but shifts full responsibility for security onto the individual.