A self-custody wallet means the user controls the private key. It is not recoverable like an exchange account, and on-chain address reputation or compliance screening can still affect use.
Hosted wallet
An exchange or custodian manages the account and keys. KYC and withdrawal review are clearer, but platform risk remains.
Unhosted wallet
The user holds the key directly. Control is higher, but loss, phishing, and address-contamination risk sit with the user.
Stablecoin controls
Some stablecoins allow the issuer to freeze or burn tokens at specific addresses.
A stablecoin transfer can look like a simple wallet-to-wallet move, but deposit, conversion, and redemption stages may apply different checks.
| Stage | Risk | What to check |
|---|---|---|
| Exchange withdrawal | Travel Rule checks, address verification, withdrawal limits, and high-risk address blocks may apply. | Have you checked wallet verification and network fees? |
| P2P receipt | If the sender address is linked to sanctions, hacks, or scams, later deposits can be questioned. | Can you verify the counterparty, purpose, and address history? |
| Redemption or conversion | Issuers or exchanges may request KYC, source-of-funds evidence, or extra documents. | Are redemption rights and review steps disclosed in terms? |
FATF sees stablecoin P2P flows through unhosted wallets as harder for regulators and VASPs to monitor.
- Issuers and intermediaries may be expected to apply risk-based monitoring, customer due diligence, and suspicious activity response.
- High-risk addresses can trigger denylisting, allowlisting, freezing, burning, or smart contract controls.
- Users should not assume that personal-wallet custody guarantees unrestricted redemption or deposit access.
Self-custody increases control, but it also increases operational responsibility. Test the path with a small amount before moving meaningful funds.
Questions before transfer
- Do the sending exchange and receiving service support the same network?
- Is the counterparty address free from sanctions, hacks, mixer, or scam exposure?
- Have you checked issuer freeze or burn powers and redemption review rules?
- Have you considered hardware wallet or multisig protection for loss, wrong transfers, and phishing?