Wallets & Custody Solutions explained - securing the digital assets

In the crypto infrastructure, wallets and custody solutions help secure, manage, and access digital assets. Paula Albu and Mirela Ciobanu from The Paypers explore these key concepts.

They discuss how wallets empower individual users to take personal control of their funds, while custody solutions cater to the more complex security, regulatory, and operational needs of institutions and large investors. Besides explanations, the article covers key providers (from exchange wallets and Wallet as a Service (WaaS) platforms to self-custodial solutions and custodians), in relation to the latest trends and developments in crypto.

The article, part of an explanatory series based on The Paypers' Infographic included in the Web Payment Acceptance Report 2025, examines key players across the wallet and custody landscape. Each article from the series will feature an explanation of the main category and relevant subcategories, examples, short descriptions of key players in the space, recent news, and concluding insights into current trends.

An explanation of wallets & custody solutions

Trust is a key part of the financial landscape, and digital assets are no exception. In a rapidly evolving environment such as this, customers need reassurance that their assets are always safe and accessible. Crypto wallets and custody solutions are central to the digital asset economy, providing secure storage, controlled transfers of cryptocurrency, and support for tokenized assets. Without them, even the most advanced Web 3 applications or DeFi protocols could not achieve the trust needed for mainstream adoption.

In a recent interview at Money 20/20 Europe, it was highlighted that anyone involved with digital assets needs to pay close attention to custody, including crypto companies, traditional banks, fintech platforms, and larger businesses. Whether building their own custody solutions or partnering with specialized providers, having a secure, compliant way to protect digital assets is essential for fostering trust, enabling service offerings, business growth, and regulatory compliance. As digital assets become more mainstream, custody will grow even more important, with increasing expectations around security, transparency, and compliance, making it a key focus for anyone in this space.

Crypto wallets serve as essential tools for managing digital assets, primarily to store private keys that secure access to cryptocurrencies. They also allow customers to send, receive, and spend cryptocurrencies, acting as gateways to blockchain-based financial systems and applications.

However, crypto wallets do not hold the coins themselves, as a physical wallet holds money. Instead, it safeguards the public and private cryptographic keys that unlock assets recorded on the blockchain.

Public keys can be compared with an email address that others can use to send crypto. Therefore, it can be safely shared with anyone. On the other hand, the private key is like a secret digital signature, used to authorise transactions and prove ownership. If someone gains access to a private key, they can control the crypto associated with it.

Together, they form the foundation for identity and security in asset management and decentralised systems. By interacting directly with the blockchain, wallets verify, sign, and record transactions, serving as a trusted gateway to the digital asset economy.

But the role of crypto wallets is rapidly expanding. What once served primarily as secure storage is now evolving into a whole financial ecosystem. As highlighted in this interview about crypto payments, modern wallets go far beyond holding digital assets - many now offer built-in DeFi functionalities, including asset management, trading, and even direct payments. Users can connect to a wide range of financial services through DeFi protocols, smart contracts, and integrated exchanges, all from a single interface.

With Web3 wallets, individuals can sign up, transfer holdings, and directly participate in staking, lending, and liquidity pools for yield generation without switching platforms. This means users can manage their portfolios, earn returns, and convert gains into everyday spending power optimally in one place.

In essence, crypto wallets have evolved into one-stop applications for securing, managing, and growing digital wealth, marking a significant shift from simple key storage to all-in-one financial hubs at the centre of the decentralised economy.

How do crypto wallets work?

Crypto wallets use cryptography to interact with blockchain networks. Every time a user sends, receives, or stores crypto, the wallet runs a complex process in the background to keep the assets secure.

Typically, the process involved several key steps:

Generating a wallet address – when a user creates a crypto wallet, it generates a pair of keys: a public key and a private key. The public key is used to create a wallet address, which can be shared with others to receive cryptocurrency. The private key remains secret and is used to sign transactions, providing ownership of the assets tied to that wallet.

Storing private keys – depending on the type of wallets the user chooses, the private keys can be stored in various ways. Hardware wallets keep them offline, making them highly secure, while software wallets store them on users’ computers or mobile devices for easier access.

Executing transactions – whenever the user sends cryptocurrency to someone, the wallet uses the private key to sign the transaction. This signature proves to the blockchain network that the user is the rightful owner of the assets being transferred. Once verified, the transaction is recorded on the blockchain, and the recipient’s wallet receives the funds.

This brings us to an essential distinction in wallet design regarding who controls the private keys:

• Custodial wallets managed by third-party providers, simplifying the user experience by placing responsibility for key security with the provider.
• Non-custodial wallets require the user to manage their own keys, offering full control and privacy, but also greater responsibility for safeguarding assets.

Main types of wallets

The ecosystem categorises providers into four major groups, based on user profiles, regulatory positioning, and the degree of control they offer: exchange-based wallets, Wallet-as-a-Service (WaaS) solutions, self-custodial wallets, and institutional custody providers.

Each category plays an essential role in helping digital assets scale safely, responsibly, and efficiently.

Exchange-based wallets are digital wallets offered by cryptocurrency exchanges, where the exchange manages the user's private keys. For many beginners entering the crypto world, their journey usually begins on a centralised platform with exchange-based wallets. These wallets simplify the process by handling customers' private keys, making buying, trading, and spending crypto as intuitive as mobile banking.

As providers expand into regulated markets and integrate with payment networks, exchange-based wallets are increasingly enabling real-world utility, an essential factor in turning crypto from an investment product into a spending option.

Key players in this category include Binance and Blockchain.com.

Binance is a centralised cryptocurrency exchange that provides users with access to hundreds of trading pairs, allowing them to convert one crypto asset for another. Recently, Binance gained approval to acquire GOPAX in Korea, enabling it to take control of GOPAX’s management and resume its Korean operations. Additionally, Binance partnered with Mastercard to launch its Binance Card for all users in Brazil, allowing users to spend cryptocurrencies for daily transactions.

Blockchain.com offers all-in-one crypto wallet services, allowing customers to buy, sell, swap, and send digital assets, while also letting them explore NFTs, DeFi, and Meme coins. The firm continues to expand its services into new markets, as in October 2025, it secured a MiCA licence in Malta, and previously partnered with Bakkt to expand crypto buying to all 50 US states.

These recent moves highlight a dual focus: strengthening legitimacy through regulatory compliance and licences to build user trust, as well as improving accessibility through expansion, partnerships, and diversified services such as payments, NFTs, and DeFi.

Wallet-as-a-Service (WaaS) refers to enterprise-grade solutions that allow businesses to integrate crypto wallets into their services without building the infrastructure themselves. Banks, PSPs, and fintechs can integrate custody-grade key management and blockchain connectivity through APIs, reducing development costs and operational risks.

WaaS is the infrastructure layer most customers never see, but it is critical. By powerfully abstracting blockchain complexity away from the user experience, WaaS helps digital assets surface within the regulated financial products people already trust, from payment solutions to investment apps.

One of the main players in this field, Anchorage Digital, a regulated crypto platform that provides institutions with combined financial services and infrastructure solutions, recently integrated Jupiter into its institutional wallet. Additionally, Privy was acquired by Stripe, marking the entry of a global fintech giant into the crypto sector and extending its suite of digital asset tools.

These developments indicate that WaaS is rapidly maturing from niche infrastructure to mainstream adoption. Institutional providers such as Anchorage Digital are deepening their offering through integrations, while fintech giants like Stripe are entering the space through acquisitions. Together, these moves highlight that WaaS is evolving into a key enabler for businesses looking for secure and scalable entry into the digital asset ecosystem.

Self-custodial wallets are a type of cryptocurrency wallet that gives users complete control over their private keys, enabling them to interact directly with decentralised services. This makes them the passport to Web 3, the entry point into DeFi platforms, NFT marketplaces, tokenized assets, and digital identity solutions.

Therefore, users can easily transfer, receive, and store cryptocurrency without the limitations or oversight imposed by centralised exchanges. Among other key features are complete control (they can make actions without needing permission from a third party), security (self-custodial wallets are generally considered secure because they reduce the risk of hacks associated with centralised exchanges, but users are responsible for safeguarding their private keys and recovery phrases), and privacy (typically they do not require personal information to set up).

Among the important key players are Bitkey, MetaMask, Phantom, and Trust Wallet.

MetaMask is a software cryptocurrency wallet that allows users to interact with the Ethereum blockchain. Recently, the company confirmed preparations for the launch of its native token, MASK.

Trust Wallet, another major player, is a decentralised, multi-chain cryptocurrency wallet that allows users to store, manage, and interact with a wide range of digital assets, including cryptocurrencies and NFTs. In September 2025, it teamed up with Kraken and Backed to expand the adoption of xStocks, offering users global access to tokenized US equities. Additionally, together with MoonPay, Trust Wallet aims to improve global crypto transactions for users worldwide.

These developments reflect a wider trend toward providing users with more optimal control and accessibility in the digital asset ecosystem. Self-custodial wallets are evolving beyond storage solutions to become gateways to Web 3, tokenized assets, and decentralised finance.

Institutional custody providers

For financial institutions and corporates, managing digital assets requires far more than key storage. Institutional custody providers combine optimal security technologies with compliance frameworks, asset segregation, insurance coverage, and auditability. These capabilities are transforming digital assets from speculative instruments into investable asset classes recognised by regulators, asset managers, and traditional market infrastructure.  

Strong Institutional Custody Providers refer to companies that specialise in secure digital asset storage for institutional investors. Some of the key players are BitGo, which recently filed for a US IPO, a move that shows how crypto custody firms are stepping into TradFi capital markets, and Coinbase, which this fall applied for the charter with the Office of the Comptroller of the Currency (OCC) to build on its custody business. Potentially related but not pure Custody Providers are those companies that offer custody as part of a broader service suite (e.g., trading, payments, infrastructure). Among the players are PayPal, which continues to expand its crypto capabilities through the integration of PYUSD across 9 blockchains.

Some regulatory updates around crypto wallets & custody services

Today, wallet and custody solutions are facing rapid transformation. Regulatory, including frameworks like the EU’s MiCA regulation, is accelerating maturity, while institutional demand is reshaping service expectations. What was once a particular technical product has become an important foundation for the future of finance.

In the UK, the FCA issued a consultation (CP 25/14) in May 2025 proposing rules for qualifying stablecoin issuers and crypto asset custodians, including segregating client assets, maintaining trust-style safeguarding, and daily reconciliations.

Under the UK Money Laundering Regulations (MLRs), crypto firms offering custody services must register with the FCA. The proposed regime also requires crypto custody firms to keep client-specific records independent of blockchain data.

In Europe, custodial wallets are covered under MiCA and need a licencee / authorisation. They must keep clients’ crypto legally and operationally separate from their own, have robust policies, take cybersecurity seriously, and be responsible for losses. Non-custodial wallets are generally excluded from MiCA’s CASP requirements.

For e-money tokens (a kind of stablecoin under MiCA), custodial wallets might also fall under PSD2 (payment services). According to regulatory guidance, if a service holds e-money tokens for a client, it may be treated as a ‘payment account’. Furthermore, the EBA (European Banking Authority) suggests that custodial wallets for stablecoins (especially e-money stablecoins) need PSD2-style safeguards (like customer authentication) once MiCA fully applies.

In the US, crypto custody regulation is fragmented, depending on whether the custodian is an exchange, a trust company, or a wallet provider, and whether the assets are ‘normal’ crypto vs. stablecoins. Different regulatory bodies (FinCEN, SEC, state regulators) apply, and new laws like the GENIUS Act are shaping future obligations.

In Japan, the Financial Services Agency clarified that custodial wallet providers are regulated under the Payment Services Act, but non-custodial (unhosted) wallets fall outside that regulatory perimeter. Crypto firms must safeguard private keys using robust protocols (e.g., cold wallets) as part of their compliance. The FSA's focus on custodial providers is a direct result of past exchange hacks and is intended to protect consumers whose funds are held by a third party. The hands-off approach for unhosted wallets aligns with the decentralized nature of these products, though recent international efforts and the FSA's own discussions indicate that the regulatory landscape is continuously evolving.

In Singapore, under its Payment Services Act (PSA), crypto-asset service providers who custody customer crypto (i.e., customer private keys) must be licensed, by the Monetary Authority of Singapore (MAS). Recent licensing reforms (effective June 2025) also broaden regulation to cover firms offering digital token services to overseas clients, including custodial services.

On a global level, prudential regimes for custody are emerging: per PwC, regulated custodians must implement safeguarding frameworks, maintain accurate client asset records, and build organizational controls to minimize custodied crypto loss.

The evolving landscape of digital asset wallets & custody: institutionalisation, integration, and infrastructure

While analysing the main players in the wallet and custody sector and the regulatory landscape surrounding them, several key trends become apparent.

Institutionalisation and regulatory alignment have become top priorities, with companies increasingly focused on licencing, compliance, and strategic partnerships to build trust and legitimacy among customers. The institutionalisation shift marks an important milestone in the digital asset industry, as clearer regulatory frameworks bring greater transparency, stability, and confidence for all participants.

At the same time, service diversification and integration are accelerating. The traditional distinctions between wallets, custody, and payments are becoming blurred. Many providers now combine custody, payments, DeFi access, and tokenized assets, aiming to deliver a comprehensive digital assets ecosystem instead of a single-purpose product.

In conclusion, wallets and custody solutions are becoming critical infrastructure for the digital asset economy. As institutions, fintechs, and consumers increasingly demand secure and interoperable infrastructure, these solutions will shape the future of finance, bridging traditional and decentralised systems, and enabling a more transparent, efficient, and inclusive financial ecosystem.

About Mirela Ciobanu

Mirela Ciobanu is Lead Editor at The Paypers, bridging the knowledge gap between TradFi and DeFi. With a keen eye for industry trends, she is constantly on the lookout for the latest developments in crypto and blockchain. 

Closely in contact with subject matter experts in the digital assets space, Mirela amplifies your voice through compelling interviews, webinars, reports, and articles. She aims to deliver informative and educational insights that help create the Web 3 ecosystem. To share more ideas and get inspired, connect with Mirela on LinkedIn or reach out via email at mirelac@thepaypers.com.

 

About Paula Albu

 

Paula Albu has experience in content writing and editing, as well as being a creative storyteller. As a Junior Editor at The Paypers, she investigates Web3 technologies along with the latest trends and regulations in banking and fintech. Paula is committed to turning complex industry topics into engaging, accessible content that resonates with readers and creates a meaningful connection. She is available via LinkedIn or at paula@thepaypers.com.