Not your keys, not your coins

Whoever holds the private keyGlossaryPrivate keyA secret, randomly generated number that you use to sign transactions and so control your bitcoin. Anyone who knows the private key can spend the bitcoin that belongs to it – it must never fall into anyone else’s hands.On the learning path: Stage 5 · Step 3 – Backing up your seed phrase →In the glossary →× controls the bitcoin. If your bitcoin are on an exchange or in an app, the provider holds the keys. You then only have a contractual claim – just as a bank balance is a claim against the bank, not cash in your pocket.

What can happen

The Tokyo-based exchange Mt. GoxGlossaryMt. GoxA Japanese Bitcoin exchange that collapsed in February 2014. Around 850,000 BTC were missing; just under 200,000 turned up again. Since July 2024, the trustee has also been repaying creditors in bitcoin; the current deadline is 31 October 2026.On the learning path: Stage 5 · Step 1 – Understanding custody →In the glossary →× halted all bitcoin withdrawals on 7 February 2014 and filed for bankruptcy protection on 28 February 2014. Around 850,000 BTC were missing; about 200,000 BTC later turned up in an old wallet.^[1] In November 2022, the exchange FTXGlossaryFTXA large crypto exchange that collapsed in November 2022. Around $8 billion in customer funds was missing, and founder Sam Bankman-Fried was sentenced to 25 years in prison. Customers got dollars back instead of their bitcoin.On the learning path: Stage 5 · Step 1 – Understanding custody →In the glossary →× also halted withdrawals and filed for bankruptcy protection two days later.^[2]

What the law says today

In the EU, crypto-asset service providers that hold their clients’ crypto-assets must keep them separate from their own.^[3] In Germany, under § 45 KMAG (the Crypto Markets Supervision Act), crypto-assets held in custody are deemed to belong to the client – unless you have agreed that the custodian may dispose of them for its own account or for others. If the provider becomes insolvent, you can therefore generally claim them back (as of September 2026).^[4] That doesn’t prevent account freezes, hacks or lengthy proceedings, though.

Self-custody means responsibility

With your own wallet, you hold the keys yourself – and carry the risk alone: if you lose your seed phraseGlossarySeed phrase (recovery phrase)A sequence of usually 12 or 24 words from which your wallet derives all its private keys. Anyone who knows the words has full access to your bitcoin – so they belong in an offline backup and never in anyone else’s hands.On the learning path: Stage 5 · Step 3 – Backing up your seed phrase →In the glossary →×, nobody can help you. Practise with small amounts and test the recovery before you transfer larger sums. Setting up your first wallet shows you how to get started.

A Bitcoin ETPGlossaryETP (Exchange Traded Product)Umbrella term for exchange-traded securities such as ETFs, ETCs and ETNs. With a Bitcoin ETP, you hold a security that tracks the price – but no bitcoin keys of your own.On the learning path: Stage 4 · Step 1 – Ways to get Bitcoin →In the glossary →× in your securities account doesn’t give you the keys either: you own a security, not bitcoin (more under Bitcoin ETPs).