Non-custodial

Non-custodial means the user holds the private keys to their cryptocurrency. Custodial wallets (Coinbase, Binance, most CEXes) hold customer keys and can freeze, restrict, or seize funds. Non-custodial wallets (hardware wallets, Sparrow, Cake, Phoenix) generate keys client-side; the user's seed phrase is the only way to access the funds. Loss of seed = loss of funds; freezing by a third party is impossible.

For offshore hosting customers, paying from a non-custodial wallet is essential to the privacy model: the host receives a payment from a wallet that no exchange can trace back to a KYC profile, and no third party can intervene to reverse the payment. Most P2P-acquired BTC, XMR, and atomic-swap output ends up in non-custodial wallets by default. The customer's responsibility: backup the seed phrase securely.