Unhosted wallet
Also called self-hosted wallet, non-custodial wallet
An unhosted wallet is a crypto wallet where the user holds the private keys themselves, without a regulated provider in between. It can be software on a phone or computer, or a hardware device. Because no obliged firm sits on the user's side, transfers to and from these wallets get extra AML checks.
How it works
When a customer of an exchange or custodian sends crypto to, or receives it from, an unhosted wallet, there is no counterparty firm to exchange travel rule data with. The regulated provider collects the originator or beneficiary details from its own customer instead. Above set thresholds it also checks whether the customer owns or controls the wallet, for example through a signed message or a small test transfer.
Thresholds differ. The EU requires ownership checks for transfers above EUR 1,000 between a crypto-asset service provider and a self-hosted address. In the UK, cryptoasset businesses request information on a risk basis, and the threshold for extra originator details has been £800 since 30 June 2026. FATF guidance treats unhosted wallet transfers as a risk factor rather than banning them, and firms combine these checks with blockchain screening.
The rules
Requires CASPs to collect originator or beneficiary information for transfers involving self-hosted addresses and, above EUR 1,000, to assess whether the address is owned or controlled by their customer.
Crypto-asset service providersLets firms request originator and beneficiary information for unhosted wallet transfers on a risk basis, and bars them from making cryptoassets available when requested information is not received.
UK cryptoasset exchange providers and custodian wallet providersTreats transfers to and from unhosted wallets as a risk factor and expects VASPs to collect travel rule information from their own customers and apply risk-based controls.
Countries and virtual asset service providersCommon questions
Are unhosted wallets illegal?
No. Holding crypto in your own wallet is lawful in the UK, EU and US. The rules apply to regulated firms that send funds to, or receive funds from, these wallets.
How does a firm prove a customer controls a wallet?
Common methods include asking the customer to sign a message with the wallet's private key, or to send a small test amount from the wallet. Firms choose the method based on the risk and value of the transfer.
Does the US have an unhosted wallet rule?
FinCEN proposed reporting and recordkeeping rules for some unhosted wallet transactions in December 2020, but withdrew the proposal in October 2026. US firms apply general Bank Secrecy Act and sanctions duties instead.
