In a custodial crypto wallet, where are private keys stored?

In a custodial crypto wallet, private keys are stored on a server managed by the company providing the wallet service. This means that the wallet provider takes responsibility for securely storing and managing the private keys on behalf of the user. This arrangement allows users to access their cryptocurrency without needing to handle the private keys themselves, which can simplify the user experience, particularly for those who may not be familiar with managing crypto security.

The custodial model contrasts with non-custodial wallets, where users retain full control and responsibility for their private keys, typically storing them on their own devices or in offline locations. In the custodial scenario, users rely on the security measures put in place by the service provider to safeguard their assets. This can offer convenience but also comes with considerations regarding trust and risk management, as the user does not directly control the private keys associated with their cryptocurrency holdings.