What is a cold wallet? Hot vs cold wallets explained

A cold wallet is a crypto wallet whose private keys sit on something that is not connected to the internet, typically a physical device such as a USB drive, or even a piece of paper. A wallet does not hold coins, only the keys that let you spend them. The trade-off is simple: cold storage is generally safer from online attacks, but it is less convenient and the device can be lost, damaged or stolen. This page explains the difference between hot and cold wallets, who holds your keys, and how people still lose money. For the wider picture, start with our wallets and security guide.

What a cold wallet is (and what it stores)

The US Securities and Exchange Commission (SEC) explains in its December 2025 investor bulletin on crypto custody that crypto wallets do not store crypto assets themselves. They store the private keys.

Two keys matter here:

• The private key authorizes transactions. Whoever has it can spend the crypto.
• The public key works like the email address of your wallet. You can share it so people can send you crypto.

If you lose your private key and have no backup such as a seed phrase, you permanently lose access to the crypto in that wallet. That is why people talk about "cold storage": the private key is kept somewhere an attacker on the internet cannot reach it.

The SEC lists the usual forms of a cold wallet as a hardware device, a USB drive, an external hard drive or paper. A hardware wallet is therefore one kind of cold wallet, not a separate thing. For models and how they work, see our guide on how hardware wallets work.

Hot wallet vs cold wallet: the differences

A hot wallet is connected to the internet. A cold wallet is not. Cold describes where the private key lives. Many cold wallets connect briefly to a phone or computer to approve a transaction, but the key itself stays offline. Everything else follows from that one difference.

Both types usually involve transaction fees when you send crypto.

A common setup uses both: a hot wallet for small, frequent spending and a cold wallet for crypto you do not plan to touch. This is a common pattern, not advice on how much to keep where.

As a rule of thumb, a hardware wallet works as a cold wallet and a software wallet (an app on an internet-connected phone or computer) works as a hot wallet. What decides it is whether the private key is ever online.

Hot or cold is not the same as who holds your keys

Beginners often mix up two separate questions. The first is whether the key is online (hot or cold). The second is who holds the key. The SEC says hot and cold options exist for both self-custody and third-party custody.

• Self-custody: you alone control the keys and the seed phrases. You also have sole responsibility for keeping them safe. If a wallet is lost, stolen, damaged or hacked, you may permanently lose access.
• Third-party custody: an exchange or custody provider manages and controls the private keys for you. Its accounts may use cold wallets, hot wallets or both.

With an exchange account, the exchange decides which, not you.

This answers a common search, "Binance cold wallet". An exchange may keep customer crypto in cold storage, but you still do not hold the keys. The SEC warns that if a third-party custodian is hacked, shuts down or goes bankrupt, you may lose access to your crypto. If you buy crypto this way, our guide to buying crypto on an exchange covers how to check a provider.

A dated example shows why custody matters. On or about 21 February 2025, about $1.5 billion in virtual assets was stolen from the exchange Bybit. The FBI said in a public service announcement on 26 February 2025 that North Korea was responsible. The notice does not say how Bybit stored the keys. It does show how much customer crypto can sit with one custodian.

Is it a cold wallet? Checking common products

Readers often search for a product name. The statements below come from the makers' own pages as of November 2026, and we do not rank or recommend any of them.

Is Trezor a cold wallet?

Trezor sells hardware wallets. A hardware wallet is a physical device that keeps keys offline, which matches the SEC's definition of a cold wallet. For differences between models, read our hardware wallet guide.

Is Tangem a cold wallet?

Tangem calls its product a cold wallet and says it is fully non-custodial. According to Tangem, when the card is set up without a seed phrase, its secure element generates the private key and the key stays in the chip. Tangem also says the card has no battery, is powered by the phone's NFC module, and signs when you tap it to the phone.

Tangem says backup cards replace the traditional 12-word recovery seed, and that a seed phrase remains optional. These are the maker's claims. The SEC's point about self-custody still applies: you hold sole responsibility, so losing every card without a backup could mean losing access.

Is Coinbase Wallet a cold wallet?

No. Coinbase describes Coinbase Wallet as a self-custodial wallet app. An app on a phone or computer that is connected to the internet is a hot wallet under the SEC's definition. Self-custodial means you hold the keys. It does not mean the keys are offline.

How people still lose crypto held in cold storage

• Physical loss. The device can be lost, damaged or stolen, and the SEC notes this may result in permanent loss.
• A lost or exposed seed phrase. The seed phrase restores your wallet if the device is lost or damaged. Anyone who gets it can restore your wallet too. Our guide explains what a seed phrase is and how to store it.
• Scams. Never share your seed phrase with anyone, whoever they say they are. Treat any request for it as a scam attempt. See common crypto scams.

How to set up cold storage safely

For choosing and setting up a device, use the hardware wallet guide linked above.

1. Decide what you need in a hot wallet and what you want in cold storage. Hot wallets suit frequent use, cold wallets suit crypto you rarely move.
2. Accept that self-custody makes you solely responsible for the keys. There is no provider to call if you lose them.
3. Budget for the device and for transaction fees. Physical cold wallet devices typically cost money, and transactions typically involve fees.
4. Write down the seed phrase, store it in a secure place and share it with no one.
5. Send a small test amount first and check that it arrives before you move more.

What changes for UK custody rules in 2027

This section applies to the UK only. The Financial Conduct Authority (FCA) published its cryptoasset regime policy statements on 30 June 2026. The full scope of regulated activities expands from 25 October 2027, including rules for firms that safeguard (hold) client cryptoassets. These rules cover firms that hold cryptoassets for clients as a business, such as exchanges and custodians. Keeping your own cold wallet does not bring you under them.

Frequently asked questions