Non-custodial vs custodial

Non-custodial and custodial describe who controls an asset and the keys that authorize moving it. The distinction matters most in crypto, where control of a private key is control of the funds.

In a custodial setup, a third party holds your assets and keys for you. Banks, brokerages, and many crypto exchanges work this way. You rely on that company to keep records, secure the funds, and process withdrawals. This can be convenient and can offer account recovery if you lose your password, but it also means the provider, not you, has direct control.

In a non-custodial setup, you hold your own keys, often in a personal wallet or smart contracts. A service cannot move your assets without your authorization. This gives you direct control but places responsibility on you. If you lose your keys or approve a harmful transaction, usually no one can reverse it.