How can crypto investors avoid the regulatory risks associated with centralized storage?


Cryptocurrency storage is one of the most important things for investors to consider when joining the booming digital asset market

However, most people in this space have little to no knowledge of the options out there. As it stands, crypto exchanges currently hold the largest share of investor capital despite the associated risks, including hacking and regulatory pressure from supervisors.

Before diving deeper, it should be noted that there are currently two types of crypto wallets; custodial and non-custodial. The former is offered by centralized encryption service providers while the latter requires no third-party intervention. Simply put, noncustodial wallets allow crypto users access to their private keys, meaning an investor is in full control of their funds at all times.

So what is the danger of storing crypto funds in a custodial wallet? For starters, this type of crypto storage keeps a user’s private keys, which prevents them from accessing their funds without the blessing of the service provider. In the past, there have been several instances where crypto investors have lost a ton of money as a result of crypto exchange hacks or directives from authorities to freeze funds.

Some of the notable incidents include the Mt.Gox To hack in 2014, where 850,000 Bitcoins were siphoned from the exchange (worth around $460 million at the time). On the regulatory front, authorities have in the past seized crypto assets using centralized exchanges. Additionally, it has become quite easy for regulators to order crypto funds to be frozen following new compliance laws such as 5AMLD and MiCA.

Non-custodial portfolios

Like most technological innovations, the crypto ecosystem has evolved to offer a wide range of products; users now have the option of storing their assets with non-custodial exchanges or wallets. While centralized crypto custody still enjoys a comfortable lead, non-custodial wallets have started to become mainstream given their value proposition when it comes to the principle of decentralization.

To that end, we have several options that crypto users can take advantage of, the most notable include hardware wallets such as trezor and ledger. These off-chain cryptographic storage solutions are designed as a hard drive (cold storage) accessible only through a private key held by the owner. This means that no government institution can access its crypto funds; however, they can be hacked if a malicious player obtains the login credentials.

The other alternative is a software wallet like Metamask; according to the last update by Consenysys, this wallet hosts over 10 million monthly active users (MAUs). Quite a large share of the crypto market, given that decentralized finance (DeFi) innovations on Ethereum picked up the other day. That said, Metamask’s current infrastructure is somewhat sophisticated for new entrants to the crypto market.

So where can a newbie store their newly found DeFi wealth? There are Metamask alternatives such as the Ambire wallet which offers a simpler user interface. Most notably, this noncustodial wallet has an email registration option, eliminating the need for crypto investors to manage complex seed phrases. Additionally, Ambire has launched a web application that beginners can navigate easily compared to the browser extension offered by Metamask.

As we can see from these few examples, crypto investors are not limited to the services offered by centralized exchanges. In fact, it’s much easier to navigate the DeFi ecosystem through non-custodial wallets like Metamask and Ambire. After all, it’s much better to have control over your private keys; not your keys, not your crypto!

Final Thoughts

The value of any asset largely depends on the ability to liquidate without too much hassle; That being the case, crypto investors need to be very careful about where they store their assets. As much as crypto exchanges are easily accessible, the underlying risks cannot be ignored. It is much better to store one’s funds on a decentralized platform where they have full control instead of relying on centralized intermediaries that have proven to be easily compromised by hackers and regulatory measures.


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