Custody risk is the possibility that an organization holding assets may lose control of them, or that customers may be unable to access them. For crypto platforms, it can arise from compromised wallets or keys, operational failures, or a security response that temporarily suspends deposits and withdrawals.
Custody risk matters because a platform can concentrate control over many customers’ assets. During an incident, operators may pause transfers to limit further movement while they investigate and secure systems. Customers and defenders should distinguish temporary access restrictions from confirmed losses: a withdrawal halt alone does not establish whether assets were stolen or recovered. Strong key management, transaction monitoring, and tested isolation and recovery procedures help reduce this risk.