When you buy cryptocurrency, you need to decide where you want to store your crypto. You can choose to take ‘self-custody’ of your crypto or you can use a storage service offered by crypto exchanges or brokers.
As an analogy, think about how you currently hold your fiat money – in cash, in a bank account, in a brokerage account, or somewhere else. If you lose money from your wallet, you have no recourse.
Similarly, the risk in taking self-custody of your crypto is if you lose your crypto, there is no recourse. The benefit of self-custody is the peace of mind that some people may have knowing that protection of their crypto wealth is not entrusted to some other entity.
Some investment tools and products require that your crypto is stored in a particular account. For example, when you buy crypto through UNest, your holdings will automatically be stored in an account managed by our partner, Bakkt. By storing crypto in this way, parents can buy crypto with the knowledge that their holdings are safeguarded and available to their child when they turn 18.
Though unlikely, it is possible to lose funds stored on a crypto exchange or with a crypto broker. In the event that funds are stolen in a hack, your crypto is not insured by the Federal Depository Insurance Corporation (FDIC). Many American citizens are used to operating with the knowledge that the money the deposit in a checking account is FDIC insured. Remember, crypto exists outside the traditional financial system, which means you are not guaranteed repayment of lost funds.
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, UNest does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information.