Self vs Exchange custody: Costly mistakes SA newbies make

🔴 You might also like to read:

December-and-January fraud spike: what’s trending and why it works

December-and-January fraud is less about clever tech and more about rushed decisions. Knowing the patterns is often enough to reduce the chance of begin scammed.

Flip the MarketLiz Thorne

Crypto custody sounds like admin until it wipes your balance. Most South Africans only learn the difference between “my crypto is mine” and “my crypto is in someone else’s app” after a login fails, a withdrawal freezes, or a scammer has access to a seed phrase. If you’re new, start with the basics of seed phrase security (screenshots are how people lose money).

Custody is a risk decision, not a vibe decision. It also has a local twist: if you’re using a South African platform, the FSCA-licensed crypto provider angle matters because the regulator has put crypto assets under the FAIS net, which changes who is supervised and who is operating in the dark.

The simple definition people skip

Exchange custody means the platform controls the private keys. You have a login and a claim on your balance, not the keys.

Self-custody means you control the private keys, usually via a wallet app or a hardware wallet. No platform can “reset your password” because there is no password reset.

Most beginners treat an exchange account like a bank account.
Crypto custody does not work like banking, and the legal protections are not the same. The first time withdrawals are paused or an account is flagged, people learn the hard way that convenience comes with counterparty risk.

What South African newbies get wrong

1) “It’s in my name, so it’s mine”
On an exchange, you own an IOU until you withdraw. If the platform is hacked, insolvent, or forced to freeze withdrawals, your “balance” can turn into a waiting game.

Global exchange collapses have already shown how quickly users move from customer to unsecured creditor.

2) “Self-custody means no risk”
Self-custody swaps platform risk for personal risk. The most significant loss events are boring:

• Seed phrases stored as screenshots, cloud backups, or notes apps
• Phishing links that trick you into approving malicious transactions
• Fake support messages asking for recovery phrases
• Sending funds on the wrong network and paying twice, or losing it entirely

Self-custody is not ‘safer’. It is ‘you are the security team now’.

3) “I’ll move it later”
Later is how fees pile up, and mistakes happen. People buy small amounts repeatedly, then do one big panicked transfer without a test send, on the worst day for network congestion, and pay more than they expected.

A simple rule helps. Do a tiny test transfer first, then move the full amount, then stop touching it.

4) “Regulation doesn’t matter”
South Africa has been tightening the perimeter. Crypto assets now sit inside an existing regulatory framework, which means some platforms operate under supervision and others do not.

This does not make crypto safe. It does make it easier to tell the difference between platforms that have obligations and those that disappear when something breaks.

How it gets expensive

Custody mistakes do not always look like theft. They often show up as friction:

• Withdrawal fees stack up, especially when networks are busy
• Spreads and slippage widen when you rush trades
• Account freezes block exits during volatility
• Messy records turn into tax and admin costs later

The direction of travel is clear. Reporting expectations are increasing, not fading, and poor custody habits today become compliance pain tomorrow.

The most expensive custody mistake is the one that blocks your exit. People obsess over buying fees, then ignore the risk of not being able to withdraw when it counts. If you cannot move funds on your timeline, you do not control your position.

When self-custody is worth it

Self-custody makes sense when:

• You’re holding longer-term, and you do not need constant access to trading features
• The amount matters enough that platform risk would hurt
• You can commit to basic operational discipline

Hardware wallets can help once balances grow, but they are not magic. They cannot protect you from giving away a seed phrase or approving a malicious transaction.

When exchange custody is fine

Exchange custody can be reasonable when:

• You’re learning with small amounts
• You’re actively trading and need liquidity
• You’re using features that are custodial by design

Convenience can be a rational choice. Pretending it is the same as control is where people go wrong.

A simple SA playbook

Start custodial, but cap it;
Set up self-custody properly once;
Move long-term holdings off exchanges;
Harden exchange accounts with app-based two-factor authentication and withdrawal controls;
Keep a basic transaction log linking wallets and platforms.

This is not about prioritising promos or magical apps, but about deciding who controls your assets before the decision is made for you.

🔴 You might also like to read:

Is the Karoo ready for solo female travellers?

For solo female travellers who value preparation over impulse and connection over anonymity, the Karoo is not only ready but rewarding.

Karoo TimesNaomi Roebert