Glossary

Self-custody wallet

A self-custody wallet is one where the user controls the private keys, with no exchange or custodian, and although no third party reports its activity to the IRS, transactions in it are fully traceable on chain and fully taxable.

How it works

In a self-custody wallet (hardware, software, or paper), you hold the private keys and no exchange or custodian controls the assets. The final broker reporting regulations did not treat wallet software as a broker, so no Form 1099-DA is issued for on-chain activity in it. Transactions in it are fully taxable and fully traceable.

Why it matters

Once any self-custody address is linked to an identity through an exchange withdrawal or a summons, the entire history is attributable. Self-custody removes the third-party report, not the obligation.

Related: blockchain analytics, KYC.

Guides that cover self-custody wallet

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Definitions are general information, not legal advice, and may not reflect the most recent changes in law.

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