Custody

Every custody model answers one question: who can move the funds, and what has to happen first. The labels matter less than the answer. Self-custody puts key generation, signing policy, operational continuity and inheritance on the holder. Exchange custody hands all of it to a counterparty whose balance sheet you cannot inspect.

A qualified custodian sits between, offering segregation and a regulatory perimeter in exchange for fees and an onboarding process.

The lesson institutions took from 2022 was not that custodians fail. It was that the failures were bookkeeping failures. FTX and Celsius did not lose keys, they commingled customer assets with their own and lent them out. Segregation, bankruptcy remoteness and whether client assets sit on the custodian's balance sheet turned out to matter more than the technical strength of the vault.

Which means custody diligence splits in two, and both halves have to hold. The cryptographic question is how keys are generated, stored, and invoked. The legal question is whose asset it is in an insolvency, which jurisdiction decides, and what the insurance actually covers, since policies typically carry limits and exclusions and may cover only part of the assets under custody rather than the full balance. The self-custody risk guide works through both.