Are non-custodial crypto wallets becoming a thing of the past?

[Alpen]

Since the early years of cryptocurrency adoption, a dogma has emerged that many digital asset experts repeat to newcomers like a mantra. They advise them to set up their own wallet on a computer or smartphone, preferably a cold wallet, and to keep the seed phrase safe — some even joke about putting it under their pillow to memorize it.

Such wallets are called non-custodial; they do not require verification, are free to download, and are easy to install. They don’t rely on third parties and provide maximum privacy and freedom.

However, by 2025, 41% of users out of 820 million active crypto wallets worldwide will choose custodial solutions. The majority of users, 78%, will go with hot (online) wallets.

The main growth in custodial wallets comes from institutional investors, who, in theory, should prefer cold storage. In reality, in the current year alone, institutions have increased their crypto holdings on centralized services by 51%.

Analysts often explain this shift by regulatory pressure. That’s hard to deny, but convenience also plays a big role. Custodial services not only make their apps simple and user-friendly, they also add plenty of useful features:

• Simplicity: access recovery (via login/password or KYC), user support, asset insurance from large companies
• Integration with fiat: direct deposits from bank cards, instant exchange, lending
• Extra tools: staking, automatic conversion, cashbacks, exchange trading within the service

Crypto wallet providers

Exchanges and trading platforms. Most centralized exchanges (Binance, Coinbase, OKX, Kraken, etc.) provide built-in custodial wallets for storing assets, and some also have separate non-custodial products (e.g. Coinbase Wallet). Decentralized exchanges (DEX) also include wallets and liquidity pools within their apps. Exchanges remain the most convenient option for trading and fiat integration.

Payment and financial systems. Major fintech companies (PayPal, Revolut, Cash App) and even social networks have started offering crypto storage. These are essentially custodial wallets: for example, PayPal allows you to buy and hold Bitcoin, but the keys are managed by PayPal. In return, users get a simple interface and dollar pegging. The catch is that such services often have transaction limits and may not allow withdrawals to external addresses, which restricts freedom of use.

Crypto processing centers (payment gateways). These are B2B platforms aimed at businesses. Examples include Cryptomus, Coinbase Commerce, BitPay, CoinPayments, NowPayments, and others. They allow companies to accept cryptocurrency for goods and services, offering integration APIs, plugins (WooCommerce, Shopify, etc.), and multi-asset wallets (usually custodial).

Crypto processing gateways as wallet platforms

Crypto payment gateways traditionally focus on helping businesses accept and manage cryptocurrency payments. Many now include multi-currency wallets to store incoming funds. For example, Coinbase Commerce and CoinPayments let you hold funds in various cryptocurrencies before converting or withdrawing. Some services (like BitPay and Cryptomus) also provide user-facing wallet apps. They often add features such as automatic crypto-to-fiat conversion, invoicing, and analytics.

Overall, wallets in this segment are built around security, multi-currency support, and business convenience. They can support hundreds or even thousands of coins (CoinPayments handles 2,000+), and they offer quick payouts, reports, and integrations. Unlike a “pure” non-custodial wallet, the keys are often managed by the service — but businesses gain advanced tools such as automatic seller payments, delegation, and dashboards.

Among these, Cryptomus stands out as one of the most multifunctional ecosystems. Beyond business tools, it also gives private users secure storage, instant asset swaps, staking rewards (APR 3–20%), and even a P2P marketplace with over 30,000 active users. Recently, Cryptomus launched its own spot exchange, expanding its ecosystem even further.

Conclusion

Non-custodial wallets are still an essential part of the crypto infrastructure: they guarantee autonomy and serve as a safety net when trust in exchanges is low. But several factors are clearly shifting momentum toward custodial solutions: tighter regulations, broader fiat integration, and overall ease of use.

Today, only 7% of internet users own a crypto wallet. In the near future, that number will grow — mainly thanks to institutional investors and people in unstable economies. And the stats show that most of them are choosing custodial solutions.

[Upgrade00]

However, by 2025, 41% of users out of 820 million active crypto wallets worldwide will choose custodial solutions. The majority of users, 78%, will go with hot (online) wallets.

Not only are your percentages off, you seem to be confusing the terms as you go on to describe custodial users as those who rely on 3rd party services.

Also, if you're going to do an analysis, it should ideally be focused on Bitcoin users. Besides the popular advice; "not your keys, not your coins", another common one is to not invest in shitcoins, but a lot of money still go into those.

[hugeblack]

I don't know the source of these statistics, but it's a mistake to compare institutional acceptance with everyday use of cryptocurrencies.
The average person may not have access to the same guarantees as investment funds, and in that case, not your keys (not your coins) is the better option.

[ABCbits]

Such wallets are called non-custodial; they do not require verification, are free to download, and are easy to install. They don’t rely on third parties and provide maximum privacy and freedom.

This isn't accurate. Some non-custodial wallet (usually closed source) rely on server of the creator to obtain TX related with the wallet and broadcast TX created by the user.

However, by 2025, 41% of users out of 820 million active crypto wallets worldwide will choose custodial solutions. The majority of users, 78%, will go with hot (online) wallets.

Relevant xkcd comic.


Source: https://xkcd.com/285/

• Simplicity: access recovery (via login/password or KYC), user support, asset insurance from large companies

So how many custodial service actually offer asset insurance? I know Coinbase have one, but it's limited in many ways that doesn't make it interesting.

[r_victory]

I won't go into the merits of the numbers you provided; perhaps I'll research them further later. Let's get to the point: even though most people prefer wallets provided by exchanges like the ones mentioned, it doesn't mean they're better, or that non-custodial wallets will be phased out. It all depends on the needs of those using them. Generally, you can use your private key in most wallets, including custodial ones like Blockchain.com or Coinbase, for example.

[Darker45]

Ownership in the real sense, full control of your funds, freedom and independence from third-parties will never become a thing of the past. And that's basically what non-custodial wallets offer.

Its importance can't be measured by mere statistics and whatever figures. Even if 99% of crypto users are keeping their funds in centralized exchanges, that doesn't make non-custodial wallets irrelevant. And we won't be running out of hacks, seizures, bankruptcies, freezing of funds, locking of accounts, mismanagement, and so on to remind us that 'not your keys, not your coins'.

As a matter of fact, the platform you're shilling is itself a big reminder for everybody to avoid custodial services. Your blocking of payments, arbitrary locking of funds, ridiculous and questionable request for whatever proofs, and so on are the very risks involved with custodial services.

Cryptomus is itself a warning for crypto users to stick with non-custodial wallets. Cryptomus is making self-custody more relevant than ever.

[Alpen]

Also, if you're going to do an analysis, it should ideally be focused on Bitcoin users. Besides the popular advice; "not your keys, not your coins", another common one is to not invest in shitcoins, but a lot of money still go into those.

Your point perfectly illustrates that not all popular advice is good advice. Everyone says 'don't invest in shitcoins,' yet in 2024, almost all the new crypto millionaires were made by trading memecoins.

And as for Bitcoin, its time has passed. So far in 2025, it has returned a disappointing 5% for investors, while you could have made 45% on gold during the same period

I don't know the source of these statistics, but it's a mistake to compare institutional acceptance with everyday use of cryptocurrencies.
The average person may not have access to the same guarantees as investment funds, and in that case, not your keys (not your coins) is the better option.

Institutional players are buying Bitcoin through ETFs. And you can buy shares in those same ETFs through almost any broker, giving you the exact same guarantees and protections from the stock exchange.

This isn't accurate. Some non-custodial wallet (usually closed source) rely on server of the creator to obtain TX related with the wallet and broadcast TX created by the user.

Open source is a foundational principle of the entire crypto industry. So, what's the point of downloading and trusting a closed-source wallet? I'm genuinely curious—could you please explain the logic and provide an example of such a wallet?

As for the statistics in my article, I took them from this source: https://coinlaw.io/cryptocurrency-wallet-adoption-statistics/#:~:text=2025.%20,rose%20to%20%245%2C300%20in%202025

As a matter of fact, the platform you're shilling is itself a big reminder for everybody to avoid custodial services. Your blocking of payments, arbitrary locking of funds, ridiculous and questionable request for whatever proofs, and so on are the very risks involved with custodial services.

Cryptomus is itself a warning for crypto users to stick with non-custodial wallets. Cryptomus is making self-custody more relevant than ever.

My research mentioned 13 different companies, but for some reason, you've chosen to fixate only on Cryptomus. Perhaps you're newer to the crypto space, but trust me, the exact same complaints you have about Cryptomus are leveled against every major brand on that list.

Let's not forget: Binance has been sanctioned by countless regulators, and its founder has served jail time. The owner of OKX was reportedly detained by Chinese police, taking the keys with him and halting withdrawals for months. Coinbase was caught selling user data and tried to hide it for a long time.

Blocking and freezing funds is standard practice for any company that complies with KYC regulations, as Cryptomus does. Any address that violates AML rules will be blocked—this sometimes even happens on DEXs. And even with your non-custodial wallet, if you hold 'tainted' stablecoins like USDT or USDC, the issuer can freeze them at the contract level. 'Not your keys, not your coins' won't save you then.

KYC is coming to all wallets and will eventually cover the entire crypto market. It's inevitable now that developed countries are legalizing and regulating digital assets. No one has repealed the FATF guideline

[rat03gopoh]

What you need to know is that all statistics involving individuals are unreliable. Most of them are derived from questionnaires from centralized services, and their sample sizes are certainly very limited in terms of the extent to which they reach their users. I hardly believe that 50% of non-custodial wallet users (as their primary wallet) are willing to answer privacy-related questions.

but for some reason, you've chosen to fixate only on Cryptomus.

Because you did, remember?

Among these, Cryptomus stands out as one of the most multifunctional ecosystems.

[Upgrade00]

Your point perfectly illustrates that not all popular advice is good advice. Everyone says 'don't invest in shitcoins,' yet in 2024, almost all the new crypto millionaires were made by trading memecoins.

You are again throwing numbers around with no source. More people have gotten rekt chasing the next shitcoun to pump than those that have gotten rich. You seem to be fixated on the few influencers who try to get more people into their rug pulls.

And as for Bitcoin, its time has passed. So far in 2025, it has returned a disappointing 5% for investors, while you could have made 45% on gold during the same period

Yet, Bitcoin has risen by 76% in a year, while gold is at 44%.

[ABCbits]

This isn't accurate. Some non-custodial wallet (usually closed source) rely on server of the creator to obtain TX related with the wallet and broadcast TX created by the user.

Open source is a foundational principle of the entire crypto industry. So, what's the point of downloading and trusting a closed-source wallet? I'm genuinely curious—could you please explain the logic and provide an example of such a wallet?

I wish entire crypto industry actually value open source. But the reality closed source wallet/app remain popular option. If you search "crypto wallet" on Google Play, most of the top result is either closed source wallet or exchange app.

However, by 2025, 41% of users out of 820 million active crypto wallets worldwide will choose custodial solutions. The majority of users, 78%, will go with hot (online) wallets.

As for the statistics in my article, I took them from this source: https://coinlaw.io/cryptocurrency-wallet-adoption-statistics/#:~:text=2025.%20,rose%20to%20%245%2C300%20in%202025

So you mixed 2 different point, which makes it confusing to read.

Hot wallets account for 78% of all crypto wallets in 2025, remaining the dominant choice due to accessibility.

Custodial wallets are now used by 41% of users, while non-custodial wallets are preferred by 59% in 2025.

[joniboini]

KYC is coming to all wallets and will eventually cover the entire crypto market.

How would the government even enforce this? Are they going to sue Electrum developers if they don't implement KYC? And who do you think will be allowed to store the data for that? You think people will be fine with that? I'm sure there'll be some options even if that happens. It just feels redundant trying to KYC someone when the majority will eventually use an exchange or centralized services in the end. CMIIW.

[sokani]

Also, if you're going to do an analysis, it should ideally be focused on Bitcoin users. Besides the popular advice; "not your keys, not your coins", another common one is to not invest in shitcoins, but a lot of money still go into those.

Your point perfectly illustrates that not all popular advice is good advice. Everyone says 'don't invest in shitcoins,' yet in 2024, almost all the new crypto millionaires were made by trading memecoins.

And who do you think is profiting from memecoins? FYI, it's the creators of those shittycoins and a few others who have inside information that only benefits from them. About 99% of the investors lost their investment after the price tanks.

And as for Bitcoin, its time has passed. So far in 2025, it has returned a disappointing 5% for investors, while you could have made 45% on gold during the same period

Another lie. Bitcoin is up by 22.45% this year.


Source: https://www.statmuse.com/money/ask/bitcoin-yearly-returns-last-10-years

[Darker45]

As a matter of fact, the platform you're shilling is itself a big reminder for everybody to avoid custodial services. Your blocking of payments, arbitrary locking of funds, ridiculous and questionable request for whatever proofs, and so on are the very risks involved with custodial services.

Cryptomus is itself a warning for crypto users to stick with non-custodial wallets. Cryptomus is making self-custody more relevant than ever.

My research mentioned 13 different companies, but for some reason, you've chosen to fixate only on Cryptomus. Perhaps you're newer to the crypto space, but trust me, the exact same complaints you have about Cryptomus are leveled against every major brand on that list.

Let's not forget: Binance has been sanctioned by countless regulators, and its founder has served jail time. The owner of OKX was reportedly detained by Chinese police, taking the keys with him and halting withdrawals for months. Coinbase was caught selling user data and tried to hide it for a long time.

Blocking and freezing funds is standard practice for any company that complies with KYC regulations, as Cryptomus does. Any address that violates AML rules will be blocked—this sometimes even happens on DEXs. And even with your non-custodial wallet, if you hold 'tainted' stablecoins like USDT or USDC, the issuer can freeze them at the contract level. 'Not your keys, not your coins' won't save you then.

KYC is coming to all wallets and will eventually cover the entire crypto market. It's inevitable now that developed countries are legalizing and regulating digital assets. No one has repealed the FATF guideline

1. You don't have to be defensive against Binance, OKX, Coinbase, and the rest of the gang. They're as guilty. I singled out Cryptomus only because your post is nothing but a subtle attempt to shill it.

2. Blocking and freezing funds--and I must add, arbitrarily--are indeed the standard practice among centralized exchanges. And that's exactly the reason why such services are to be avoided as much as possible. That's exactly the reason why users should go for open-source non-custodial wallets.

3. I'm specifically referring to Bitcoin, not centralized altcoins. I agree that with the latter self-custody is pointless. However, to self-custody an altcoin at least removes the possibility that it could be seized by custodians for whatever flimsy reason.

4. You know that it's next to impossible to KYC all wallets.

[Alpen]

What you need to know is that all statistics involving individuals are unreliable. Most of them are derived from questionnaires from centralized services, and their sample sizes are certainly very limited in terms of the extent to which they reach their users. I hardly believe that 50% of non-custodial wallet users (as their primary wallet) are willing to answer privacy-related questions.

but for some reason, you've chosen to fixate only on Cryptomus.

Because you did, remember?

Among these, Cryptomus stands out as one of the most multifunctional ecosystems.

I thought that providing a link to statistics from reputable companies would be sufficient, but you seem to be dismissing that data entirely. Now you've gone a step further and are essentially asking me to disregard my own personal experience as well.

I've been actively working with crypto payment gateways for over a year. So, I'll make you an offer: if you can name a single company from my list that provides a wider range of wallet features than Cryptomus, I will happily edit my post.

Yet, Bitcoin has risen by 76% in a year, while gold is at 44%.

Your remark prompted me to do a little research on the Gold vs. Bitcoin topic. Here's what I found. Before this year, gold had only outperformed Bitcoin three times:

1. 2014:

Bitcoin: ~ -58%

Gold: ~ -2%

2. 2018:

Bitcoin: ~ -73%

Gold: ~ -2%

3. 2022:

Bitcoin: ~ -65%

Gold: ~ -0.4% (basically flat)

As you can see, gold has only beaten Bitcoin during 'crypto winters'. But we are not in a crypto winter in 2025—that bear market period is likely still ahead of us. Yet, Bitcoin is already underperforming a traditional safe-haven asset.

Could it be that investors are finally getting tired of Bitcoin?

KYC is coming to all wallets and will eventually cover the entire crypto market.

How would the government even enforce this? Are they going to sue Electrum developers if they don't implement KYC? And who do you think will be allowed to store the data for that? You think people will be fine with that? I'm sure there'll be some options even if that happens. It just feels redundant trying to KYC someone when the majority will eventually use an exchange or centralized services in the end. CMIIW.

I'm surprised to hear you ask 'how would they enforce this?' If you've been in the crypto space for a while, you've seen firsthand how they do it. Let's not forget:

• China: They used to dominate mining and host the biggest exchanges. The government crushed the entire industry in a matter of months, shutting down many companies for good.
• Privacy Coins: They were listed on all major exchanges. As soon as developed nations expressed disapproval, exchanges voluntarily delisted them to stay compliant.
• Ethereum Nodes: Major node operators were caught actively censoring transactions to comply with regulations.
• US Policy: There was a serious proposal to force node operators and exchanges to only process transactions from KYC'd wallets. Trump's administration changed course, but what happens in another 4 years?
• Facebook's Libra: Governments around the world united to kill the project. They buried it for good and sent a clear message to all other social media giants: don't even think about issuing your own currency.

When governments decide to enforce something, they have plenty of ways to make it happen.

Another lie. Bitcoin is up by 22.45% this year.


Source: https://www.statmuse.com/money/ask/bitcoin-yearly-returns-last-10-years

You're not being accurate either. Bitcoin started 2025 by breaking through the $100K level. As of this moment, it has dropped back below $110K

1. You don't have to be defensive against Binance, OKX, Coinbase, and the rest of the gang. They're as guilty. I singled out Cryptomus only because your post is nothing but a subtle attempt to shill it.

I wrote a post to express two main ideas:

• Over time, users will move away from non-custodial wallets in favor of more versatile, multi-functional platforms.
• Traditional exchanges will eventually be replaced by other services, possibly crypto payment gateways.

[rat03gopoh]

I thought that providing a link to statistics from reputable companies would be sufficient, but you seem to be dismissing that data entirely. Now you've gone a step further and are essentially asking me to disregard my own personal experience as well.

If that all are the actual case, why should I care about statistics from a "reputable" article publishing company? Look at the 2nd paragraph you wrote (OP);

Such wallets are called non-custodial; they do not require verification, are free to download, and are easy to install. They don’t rely on third parties and provide maximum privacy and freedom.

Are you concluding that every user's privacy is being tracked by the author of this article?

Then, starting in the third paragraph, you start talking about percentages of the articles you read; where do those statistics come from? If you don't know, you can read the article title.

Cryptocurrency Wallet Adoption Statistics 2025: E‑Commerce, Payments & Regional Growth

Have all users who have generated private keys engaged in this activity? My country's regulations still prohibit crypto payments and e-commerce, so it's mean there are no crypto users in my country or all just rely on hot wallets? One sentence might open your mind: When it comes to privacy, it's hard to get exact numbers.

I've been actively working with crypto payment gateways for over a year. So, I'll make you an offer: if you can name a single company from my list that provides a wider range of wallet features than Cryptomus, I will happily edit my post.

I'm not interested your offer for the above reason, and if cryptomus is anti-criticism, don't mention that brand in this hellish forum.


Another thing I missed:

Today, only 7% of internet users own a crypto wallet.

Creating the perfect cold wallet doesn't require the internet.

[ABCbits]

To OP, please stop violating this forum rule.

32. Posting multiple posts in a row (excluding bumps and reserved posts by the thread starter) is not allowed.

Another lie. Bitcoin is up by 22.45% this year.


Source: https://www.statmuse.com/money/ask/bitcoin-yearly-returns-last-10-years

You're not being accurate either. Bitcoin started 2025 by breaking through the $100K level. As of this moment, it has dropped back below $110K

CoinMarketCap say Bitcoin price on 01/01/2025 is $93245 and current BTC price on CMC is $118447. It's 27% increase, so i don't see how @sokani is being inaccurate.

[DiMarxist]

It is not advisable to store any cryptocurrency in any centralized exchanges. Good example. Early this year, Bybit was hacked and many lost their Ethereum. You know they separated all the different coins in the exchange so bitcoin wallet in the app was not attacked and it was Ethereum section was attacked. And only this tells us that saving coins in exchange is very risky. It is only when you want to sell or buy cryptocurrency that you can use the exchange but to store cryptocurrency is not advisable.
With that it is good to use non custodial wallets even now to store your investment coins.

[Darker45]

1. You don't have to be defensive against Binance, OKX, Coinbase, and the rest of the gang. They're as guilty. I singled out Cryptomus only because your post is nothing but a subtle attempt to shill it.

I wrote a post to express two main ideas:

You expressed two ideas in a post promoting your platform.

Anyway,

• Over time, users will move away from non-custodial wallets in favor of more versatile, multi-functional platforms.
• Traditional exchanges will eventually be replaced by other services, possibly crypto payment gateways.

1. Even if Bitcoin is still alive a hundred years from now, users won't be moving away from non-custodial wallets. What will probably happen is that the bulk of their funds will be kept in a non-custodial wallet and then funds allocated for expenses will be kept in a more versatile and multi-functional wallet like yours.

But it doesn't have to be "over time". It's already happening right now. However, you can't dismiss the importance of non-custodial wallets. Even custodians need non-custodial wallets. Even the giant exchanges that you mentioned maintain non-custodial wallets. They need it.

2. Exchanges evolve. There's no such thing as traditional exchanges in the sense that they're fluid. They can support whatever is trending and popular in the market. They can integrate and support new developments, the latest technologies, rising innovations, and so on. Binance is the perfect example. They're doing, offering, everything. You name it, they've got it. They might one day sell Binance pizza.

[Alpen]

Creating the perfect cold wallet doesn't require the internet.

You're absolutely right, you don't need the internet to create a cold wallet. You can just store the keys on a piece of paper.

But for Bitcoin to even exist and for the blockchain to be maintained, the internet is essential.

After all, you do know that wallets don't actually store the coins themselves, right? ))))))))))

CoinMarketCap say Bitcoin price on 01/01/2025 is $93245 and current BTC price on CMC is $118447. It's 27% increase, so i don't see how @sokani is being inaccurate.

I can see Bitcoin hitting $124K

It is not advisable to store any cryptocurrency in any centralized exchanges. Good example. Early this year, Bybit was hacked and many lost their Ethereum. You know they separated all the different coins in the exchange so bitcoin wallet in the app was not attacked and it was Ethereum section was attacked. And only this tells us that saving coins in exchange is very risky. It is only when you want to sell or buy cryptocurrency that you can use the exchange but to store cryptocurrency is not advisable.
With that it is good to use non custodial wallets even now to store your investment coins.

If you're going to talk about the statistics of hacks on centralized crypto exchanges, then you should also provide the statistics for crypto losses from non-custodial wallets.

Of course, not many people will admit to losing their own crypto, but Chainalysis estimates these losses alone to be $1.7 billion just for 2023.

And you must agree that all the hacks, and even scams like FTX, were investigated at a state level, and many exchanges voluntarily reimbursed users for their losses.

No one is going to reimburse you for lost crypto from your personal non-custodial wallet.

[EarnOnVictor]

Non-custodial wallets are still an essential part of the crypto infrastructure: they guarantee autonomy and serve as a safety net when trust in exchanges is low. But several factors are clearly shifting momentum toward custodial solutions: tighter regulations, broader fiat integration, and overall ease of use.

I'm glad that you balanced things in your write-up, so no need to write an epistle anymore. Whether we like it or not, things will look like this, and the reality shows that the self-keeping of a thing is even exaggerated. Fine, it is cool and has its advantages, but look around, what care do people give? This centralised/custodial system has even helped the crypto world more than people are giving kudos to it. It's the business around it that made the crypto adoption as much as this, and not the decentralisation systems brought by the space.

In a nutshell, people care about cryptocurrency investment and payment, and not the safekeeping pe se. Can we blame them for that when they receive their money regularly? It will take an increase in the centralised fraud before people can value the self-custody systems.