With a custodial account the balance is an entry in the provider's records, backed by coins the provider controls. You instruct, they sign.
This matters enormously in fraud cases. A custodial provider is usually a regulated business with identity records, a compliance team and the technical ability to restrict an account. It is the single most useful kind of endpoint for a trace to reach.
Related terms
Exchange
A business that converts between cryptocurrencies and traditional currency and holds customer balances.
KYC
The identity checks a regulated business performs on its customers, and the records it keeps.
Deposit address
An address a service issues to a specific customer so incoming funds can be credited to their account.
More in Wallets
Guides that use this term
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