We are diving deep into non-custodial wallets: how they work, why they are growing, the dos and don’ts, typical challenges, types of non-custodial wallets, the state of DeFi, business models, regulatory challenges, and more.

Why are we doing a deep dive?

In August, we shared our plans for a white-label non-custodial wallet, with a specific emphasis on stablecoins and real-world use cases. Traditionally, non-custodial wallets have been focused on early adopters and advanced users, but we’re seeing a shift—one that’s paving the way for mainstream adoption. In our last post, we explored the idea of non-custodial neobanking, where all banking functions move on-chain.

There is a lot to unpack to understand the opportunity ahead and how to navigate it, and we believe this series will help clarify the potential and the challenges ahead.

Why should you pay attention?

The adoption of non-custodial wallets continues to rise rapidly. As of 2024, the total number of non-custodial wallets across major platforms such as MetaMask, Trust Wallet, Exodus, Coinomi, and Atomic Wallet exceeds 100 million users, reflecting the growing adoption of decentralized finance and self-custody solutions. In 2023, wallets holding at least $10 worth of USDC grew by 59%, reaching over 2.7 million wallets, despite a decline in circulating supply . This increase reflects broader trends in decentralized finance (DeFi), where stablecoin transactions, including USDC, play a pivotal role in bridging the gap between traditional and decentralized finance​. In parallel, the total crypto market capitalization rose by 108.1% in 2023, alongside increased usage of decentralized exchanges .

This shift toward mainstream adoption is already becoming evident, as startups like Decaf and Kontigo have introduced non-custodial wallets tailored for banking-like use. Both companies are targeting the Latin American market, utilizing USDC as the core asset and offering multiple on/off ramps along with optional debit cards. Kontigo also features a yield account with an annual return of 8%. These examples demonstrate how non-custodial neobanking products are beginning to address real-world financial needs, signaling a wave of new solutions as the pieces continue to come together.

While it's still early days, you may be asking many of the same questions we've been exploring. Below, we've compiled a list of questions that will guide our upcoming blog series, helping us better understand the complexities, opportunities, and risks that come with non-custodial wallets:

• What exactly are non-custodial wallets, and how do they differ from custodial wallets?
• Why are non-custodial wallets gaining popularity outside of the early crypto community?
• What are the dos and don’ts of a non-custodial wallet?
• What are the challenges with non-custodial wallets, and how are they being addressed or solved?
• What types of non-custodial wallets are available, and what are the key differences between them?
• How do non-custodial wallets handle private keys, and what are the implications for user security?
• What role do non-custodial wallets play in the adoption and usage of stablecoins?
• What are the primary risks associated with using non-custodial wallets, and how can they be mitigated?
• How do non-custodial wallets integrate with decentralized finance (DeFi) protocols?
• What are the latest technological innovations in non-custodial wallets that enhance user experience and security?
• How do non-custodial wallets support multi-chain transactions, and what are the benefits of this feature?
• What is the business model for companies offering non-custodial wallet solutions?
• How do non-custodial wallets address regulatory challenges, particularly in different jurisdictions?
• What is the impact of non-custodial wallets on financial inclusion, especially in underbanked regions?
• How do non-custodial wallets compare in terms of transaction speed and fees with traditional banking solutions?
• What trends could shape the evolution of non-custodial wallets and their role in the financial industry?

Follow along and let us know if you have any further questions. You can always come back to this post to easily link to the questions above.