Exchanges are a necessity, they’re how you get money in and out of crypto, but they’re not where you want to hold assets long-term. Think of an exchange like a public restroom: get in, do your business, get out. If you’re leaving meaningful holdings sitting there, it’s worth understanding exactly what that means legally.
What “on the exchange” actually means for ownership
When your crypto sits on Coinbase, Binance, or Kraken, you don’t hold it directly, the exchange does. Read the terms of service and you’ll typically find you’re classified as an unsecured creditor. If the exchange fails, you’re in line behind secured creditors, hoping there’s something left for you, not guaranteed your assets back. That’s a materially different position than holding assets in your own name.
How institutional custody works
The alternative institutions and high-net-worth investors use is an FBO account, “for the benefit of.” It’s the same legal structure behind a standard Schwab or Fidelity brokerage account: you own the assets outright, your name is on the account, and you can name a spouse or other beneficiaries directly. If something happens to you, the assets transfer to the people named on the account. Your family doesn’t need to locate a hardware wallet, recover a seed phrase, or figure out how to access a device you set up years earlier. Institutional custody with custody under this structure is built specifically to avoid that gap.
Who this is actually for
This kind of arrangement typically comes with minimums. At Digital Wealth Partners and Digital Ascension Group, institutional custody generally requires roughly $100,000 in XRP or at least $500,000 in total portfolio value, with private client services layered on top, including tax coordination and estate planning, closer to private banking than a typical custodial account.
What to do below that threshold
If you’re not at those levels yet, a hardware wallet is the practical alternative to leaving assets on an exchange indefinitely. BSAM is a solid option worth looking at. The core point stands either way: exchanges are built for trading, not for long-term storage, and there’s a real legal difference between holding an asset yourself and holding a claim against a company that holds it for you. Decide deliberately which one you’re actually doing with your holdings, rather than defaulting into exchange storage because it’s convenient.
Educational only, not tax, legal, or investment advice. Check primary sources and speak with a qualified professional before making financial decisions.
