Custodial Wallet

A custodial wallet is a cryptocurrency wallet where a third party (typically an exchange or financial institution) holds and manages the private keys on behalf of the user. The user trusts the custodian to secure their funds and facilitate transactions. Exchange wallets are the most common example. Custodial wallets are convenient and offer features like password recovery, but they introduce counterparty risk, as the saying goes: "not your keys, not your coins."