Self-custody

The keys are kept in a software walletGlossarySoftware walletA wallet in the form of an app on a smartphone or computer. It stores your keys on a device with internet access – convenient and usually without a purchase price, but more vulnerable than a hardware wallet. Good for smaller amounts and for practising.On the learning path: Stage 5 · Step 2 – Setting up your first wallet →In the glossary →×, on a hardware walletGlossaryHardware walletA small dedicated device that keeps your private keys offline and signs transactions internally. The key never leaves the device, so malware on your computer can’t get at it.On the learning path: Stage 6 · Step 1 – Hardware wallets compared →In the glossary →× or spread across a multisigGlossaryMultisig (multi-signature)A wallet in which several keys jointly control the bitcoin – for example 2 of 3. If one key is lost or stolen, the bitcoin stays safe. In return, setting it up and backing it up is considerably more demanding.On the learning path: Stage 6 · Step 4 – Inheritance & emergency plan →In the glossary →× set-up. The opposite is leaving your bitcoin with an exchange or app – a custodianGlossaryCustodian (custodial)A provider such as an exchange or app that holds the private keys for you. Convenient, because support can help if you lose your password – but you don’t hold the bitcoin yourself and depend on the provider paying out.On the learning path: Stage 5 · Step 1 – Understanding custody →In the glossary →×. That is what the saying ‘Not your keys, not your coins’GlossaryNot your keys, not your coinsA guiding principle of the Bitcoin community: if you don’t hold the private keys yourself, you don’t own your bitcoin directly – you only have a claim against the custodian. Exchange collapses such as Mt. Gox and FTX show why.On the learning path: Stage 5 · Step 1 – Understanding custody →In the glossary →× is getting at.

What you gain

• Nobody can block or freeze your bitcoin or hold on to it in an insolvency.
• You send and receive without asking anyone for permission.

What you take on

There’s no support and no ‘forgot password’. If you lose your keys and 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 →×, your bitcoin is gone for good. Protecting it from theft is also up to you.^[1] So start small and practise a recovery before you move larger amounts.

Is it allowed?

In the EU, yes. The Transfer of Funds Regulation places its obligations on providers such as exchanges, not on you. If you move more than €1,000 from a provider to your own wallet, or from your wallet to a provider, the provider must check whether the address belongs to you or is controlled by you (Travel RuleGlossaryTravel Rule (Transfer of Funds Regulation)An EU rule requiring crypto providers to send details of the sender and recipient with transfers. Since 30 December 2024, for more than €1,000 from or to your own wallet, the provider also checks that the address is yours.On the learning path: Stage 5 · Step 4 – First withdrawal →In the glossary →×).^[2]