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Why am I being asked about the type of crypto wallet I’m using?
Why am I being asked about the type of crypto wallet I’m using?

Explanation of why Ramp Network asks about your crypto wallet type, including definitions of hosted and self-hosted wallets.

Updated over 3 months ago

You might be wondering why we’re asking about the type of crypto wallet you’re using. It all comes down to regulations, specifically the UK’s Travel Rule, which was introduced on 1st September 2023. This rule requires us and other registered crypto businesses in the UK to differentiate between customers using self-hosted wallets (those you control entirely) and hosted wallets (managed by a third party on your behalf).

Types of crypto wallet

Your crypto wallet can fall into one of two categories: hosted or self-hosted. The key difference lies in who owns the private keys - the bits of code that give control over the wallet’s assets.

What Is a Hosted Wallet?

What is a self-hosted wallet?

A hosted wallet (also known as a custodial or custodied wallet) is a crypto wallet in which a third-party business or provider (in this case, a cryptoasset business) serves as the custodian of your cryptoassets.

Much like a traditional bank or financial institution, the provider that controls these wallets has full control over your assets, granting you intermediated access to your funds in exchange for the convenience of a managed account.

Examples of Hosted Wallets:

  • Crypto exchange wallets (i.e. Coinbase, Binance, Huobi, OKX, Bitstamp

  • CeFi crypto lenders (i.e. YouHodler, Swissborg)

  • Crypto multi-platforms (i.e. Crypto.com, Nexo)

A self-hosted (also known as non-custodial or unhosted) wallet grants the owner of the wallet sole and complete control over the private keys that are needed to conduct transactions. This means that whoever owns a self-hosted wallet has full and unrestricted control over the assets it stores.

Examples of Self-Hosted Wallets:

  • Software Wallets (i.e. Trust Wallet, Exodus, Metamask)

  • Hardware Wallets (i.e. Ledger, Trezor) - These keep your private keys safe from the internet by storing them in physical devices.

  • Cold storage” wallet - for which you’re the only one with access to the corresponding private keys. (i.e. Paper wallets, securely memorizing your seed words, or other offline methods where only you have access to the private keys.

Why Does This Matter?

The type of wallet you use determines what additional information we need to ensure we are complying with the regulations. For hosted wallets, we may need to collect additional information because a third party is involved in holding your assets. For self-hosted wallets, since you’re the one in control, the process is a bit more straightforward.

Understanding the type of wallet you use helps us ensure your transactions are safe, secure, and compliant. Plus, it allows you to consider what level of control you want over your crypto assets.

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