Binance co-founder Changpeng Zhao (CZ) has entered the debate over cryptocurrency custody, saying it may be statistically safer to store digital assets on centralized exchanges (CEXs) than through self-custody, while cautioning that both approaches carry different risks.
In an X post, CZ made the remarks in response to Bitcoin analyst Willy Woo, who shared figures showing 1.57 million BTC have been lost through self-custody compared with 1.51 million BTC lost on cryptocurrency exchanges.
“It is statistically safer to store coins on exchanges than to self custody,” CZ wrote in the post, while noting that the figures assume the underlying data is accurate.
CZ questions the data gap
According to CZ, exchange hacks are easier to quantify because they typically become major public events, whereas self-custody losses, including stolen funds, misplaced private keys and inaccessible wallets, often go unreported.
“Hack data is easier to collect on the CEX side, usually major news. It is harder on the self-custody side, where hacks, lost coins, etc. are often not reported,” he said.
CZ also noted that historical failures of now-defunct exchanges continue to weigh on exchange loss statistics. He added that Binance, along with several other major exchanges, has fully compensated users affected by exchange-side security breaches.
Despite arguing that exchange custody may be statistically safer, CZ stopped short of endorsing one model over another. “Not saying one is better than another,” he wrote. “Different approaches have different risk profiles (and product offerings), and may be better suited for different people. A balanced approach is probably best.”
Woo stands by self-custody
Woo, who has long advocated for Bitcoin self-custody, replied to CZ by acknowledging that custodial services have a role while reiterating his support for holding private keys.
“Custodial solutions have their place,” Woo replied. “Use self custody to unlock the unique protection BTC can give your family during increasingly unstable times.”
His response builds on an earlier post following the Coldcard hack, where he pushed back against the growing ETF trend, saying he has “nothing against ETFs or custodial solutions” but arguing that only self-custody preserves Bitcoin’s sovereign nature.
He also argued that only self-custody allows investors to fully benefit from Bitcoin’s sovereign properties, saying it is the only mature digital asset that cannot be blocked, debased or seized by a nation state.
Coldcard hack fuels custody debate
The exchange between CZ and Woo follows the Coldcard hardware wallet exploit, which reignited the debate over self-custody versus institutional custody.
According to Galaxy Research, attackers have stolen more than 1,367 BTC, worth around $88.6 million, from 4,585 wallets through multiple attack waves. The breach was linked to a firmware bug introduced in March 2021 that weakened the randomness used to generate seed phrases on affected Coldcard Mk3 devices.
The exploit renewed scrutiny of the risks associated with managing private keys and intensified one of the crypto industry’s longest-running debates over self-custody versus institutional custody.
Self-custody supporters argue that controlling private keys removes reliance on third parties and protects users from institutional failures, while advocates of exchange and institutional custody point to professional security practices, insurance mechanisms and user protections that can reduce the risk of irreversible losses for everyday investors.
Both CZ and Woo ultimately agreed that custodial services have a place in the ecosystem, though they continue to differ on how investors should balance security, convenience and control.
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