A crypto wallet does not store your coins. It stores the private keys that control them, so the first decision is who holds those keys: an exchange or custodian holds them for you, or you hold them yourself. Everything else about wallets follows from that choice. This section explains the options and the habits that keep your keys protected, and the guides below go deeper on each topic.
What a crypto wallet holds
In a December 2025 investor bulletin, the SEC's Office of Investor Education and Assistance put it plainly: crypto wallets do not store crypto assets themselves, they store the private keys, or passcodes, for those assets.
The private key authorizes transactions and cannot be changed. If you lose it and have no backup, such as a seed phrase, you can permanently lose access to the crypto in that wallet. The public key only lets other people send assets to you. It cannot authorize transactions.
Who holds the keys: exchange or self-custody
If you leave your crypto on an exchange or with another custodian, the custodian controls the keys. If it is hacked, shuts down or goes bankrupt, you may lose access to your assets.
With self-custody, you have sole control and sole responsibility for the private keys. If the wallet is lost, stolen, damaged or hacked, you may lose access permanently.
Neither option is right for everyone. The choice depends on how much you hold and how comfortable you are keeping a backup safe yourself. If you have not bought anything yet, start with our guide to buying your first crypto.
Hot wallet or cold wallet
The two main types of wallet differ in whether they connect to the internet.
| Hot wallet | Cold wallet | |
|---|---|---|
| Connection | Connected to the internet: a desktop, mobile or web application | Kept offline, usually on a physical device |
| Convenience | More convenient | Less convenient |
| Main risk | Exposed to cyber threats | Can be lost, damaged or stolen |
| Cost | May initially be free | The device typically costs money |
Cold wallets are generally more secure from cyber threats than hot wallets, but that does not remove the risk of losing the device. Transactions with either type typically involve fees. For a closer look at the offline option, read how hardware wallets work.
Your seed phrase is the master backup
A seed phrase is a random sequence of words that restores your wallet if you lose it or the private key, or if its hardware or software is damaged. It is also called a recovery phrase, backup seed phrase or mnemonic phrase.
Store it in a secure place and share it with no one. Anyone who has it can restore your wallet and move your assets. Our guide explains what a seed phrase is and how to store it.
Security habits that protect your keys
These tips come from the same SEC bulletin. They apply wherever you live, although the guidance cited here comes from a US regulator.
- Never share your private keys or seed phrases.
- Do not tell anyone how much crypto you hold or which coins you own.
- Watch out for phishing.
- Use strong passwords and multi-factor authentication on every online crypto account.
- Research any custodian before you hand it your assets.
Nobody legitimate will ask for your seed phrase
The US Commodity Futures Trading Commission (CFTC) states in its Beware of Imposters notice that it would never ask for your private keys or seed phrases. It also says it does not represent individual victims in fraud recovery efforts. Treat anyone who asks for your seed phrase as a scammer, including someone who claims to be a regulator or a "recovery" service.
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