Hosted Wallet


A wallet managed by a third-party service.

What Is a Hosted Wallet?

A hosted wallet in crypto is a wallet managed by a third party, such as a centralized exchange. Other providers of hosted wallets can be funds like Grayscale. Hosted wallets have the benefit of keeping funds secure even if a user forgets their password. With a non-custodial wallet, losing the private key is synonymous with losing access to their cryptocurrencies. With hosted wallets, users can turn to customer support to regain access to their funds. 

Where Are Crypto Wallets Hosted?

Hosted wallets are wallets with custodians like centralized crypto exchanges, funds in traditional finance, or other types of middlemen. The custodian hosts the wallet for the customer, similar to how a bank hosts an account. Users retain full ownership but not the custody of their crypto. This makes the wallet more convenient to use but has the downside that funds can be frozen for arbitrary reasons. 

How to Create a Hosted Crypto Wallet?

You can set up a hosted wallet in a few easy steps:

  1. Choose a platform you know and trust. This can be a reliable crypto exchange or a custodian in traditional finance.

  2. Open an account. Once you open the account, you have access to your wallet just like you would with a bank account.

  3. Use your hosted wallet. Set up a strong password and 2FA, and use your hosted wallet for trading and transferring cryptocurrencies. 

Is Coinbase a Hosted Wallet?

Coinbase Exchange is a popular centralized exchange for hosted wallets. Other centralized exchanges with hosted wallets are Binance and Kraken.

Is MetaMask a Hosted Wallet?

MetaMask is not a hosted wallet but a non-custodial one. With a non-custodial wallet, the user retains custody of their funds and cannot be frozen out of their account. 

Are Hosted Wallets Safe?

Hosted wallets transfer the security liability to the service provider. This means that the wallet's host is responsible for keeping the wallet secure. In practice, this refers to hacking risks and the risk of misusing customer funds. For instance, FTX had a popular hosted wallet before the exchange collapsed under a bank run that exposed it had used customer funds for trading. Thus, hosted wallets can be considered risky in their own way.