Not your keys, Not your Coins
Understanding - "Not Your Keys, Not Your Coins"
When your clients hold Bitcoin on an exchange like Coinbase or Kraken, they don't technically own the Bitcoin - they own an IOU from the exchange. The exchange controls the private keys (the cryptographic passwords that allow Bitcoin to be moved), which means the exchange has custody of the actual Bitcoin. This is similar to how your clients don't actually hold the physical stock certificates for their equity holdings - their brokerage holds them in street name.
The phrase "not your keys, not your coins" encapsulates a fundamental principle of Bitcoin: only the person who controls the private keys truly controls the Bitcoin. When clients keep Bitcoin on exchanges, they're exposed to risks such as exchange bankruptcy (FTX, Mt. Gox), account freezes, government seizure of exchange assets, or operational failures. For clients with $10k-$50k in Bitcoin, exchange custody may be acceptable. For clients with $100k+, self-custody, where they control their own private keys using a hardware wallet, becomes the appropriate solution. That's where we come in: providing the technical implementation while you maintain the client relationship.
Bearer Instrument
Your clients are asking about Bitcoin self-custody because they've learned an uncomfortable truth: when they hold Bitcoin on an exchange, they don't actually own it in the way they think they do. Instead, they have a claim against the exchange - essentially an IOU. The exchange controls the cryptographic private keys that allow Bitcoin to be moved, which means the exchange has custody of the actual Bitcoin, not your client.
This matters because Bitcoin was designed as a bearer asset - whoever controls the private keys controls the Bitcoin, with no intermediary required. It's more like physical cash or gold than a stock certificate. When Bitcoin is held on an exchange, your client is trusting that the exchange:
Actually has the Bitcoin they claim to have,
Won't freeze the account,
Won't get hacked,
Won't go bankrupt, and
Won't have assets seized by governments or regulators.
The collapse of FTX, Mt. Gox, Celsius, Voyager, and BlockFi demonstrated that these aren't theoretical risks - billions of dollars of client Bitcoin have been lost through exchange failures.
"Not your keys, not your coins" is the Bitcoin community's shorthand for this principle: if you don't control the private keys, you don't truly control the Bitcoin. Self-custody, where your client holds their own private keys, typically using a hardware wallet, eliminates exchange counterparty risk. The client becomes their own bank. This appeals to Bitcoin holders who understand that the entire point of Bitcoin is to remove trusted third parties. However, self-custody introduces new responsibilities: the client must secure their own backup seed phrase, protect against physical theft, and plan for the event of their own demise. If they lose their seed phrase, there's no customer service number to call - the Bitcoin is gone forever.
For advisors, this creates a dilemma: clients with significant Bitcoin holdings ($100k+) shouldn't keep it all on exchanges, but you don't have time to become a Bitcoin technical expert. That's the gap we fill. We provide white-label self-custody implementation - walking your clients through hardware wallet setup, backup systems, recovery testing, and inheritance planning. You’ll be able to maintain the financial advisory relationship and refer the technical implementation to us. Your client gets expert guidance on self-custody, you demonstrate comprehensive service, and you avoid the liability of giving technical advice outside your expertise. We handle the "keys" conversation so you can focus on the financial planning conversation.
Keys to the Global Ledger
When your clients buy Bitcoin on Coinbase, Kraken, or any other exchange, they receive a balance in their account showing they own a certain amount of Bitcoin. But technically, they don't own that Bitcoin directly - they own a claim against the exchange. The exchange controls the cryptographic private keys (think of them as the master passwords) that allow Bitcoin to be moved. This means the exchange has custody of the actual Bitcoin, and your client has an IOU. It's analogous to how your clients' stock portfolios are held "in street name" by their brokerage rather than having physical certificates in hand.
This distinction became critically important when FTX collapsed in November 2022. Clients who thought they owned Bitcoin on FTX discovered they were unsecured creditors in a bankruptcy proceeding. Their Bitcoin, worth billions collectively, was gone, likely stolen or misappropriated by FTX executives. They didn't hold the keys, so when the exchange failed, they lost their coins. This wasn't a new phenomenon: Mt. Gox (2014), Celsius (2022), Voyager (2022), and BlockFi (2022) all failed, taking client Bitcoin with them. In each case, customers learned painfully that "not your keys, not your coins."
Bitcoin was explicitly designed to eliminate this kind of trusted third-party risk. Unlike stocks or bonds, Bitcoin is a bearer asset - whoever controls the private keys controls the Bitcoin directly, with no intermediary required. It's more like physical gold or cash than a brokerage account. The Bitcoin network itself is simply a distributed ledger that tracks which private keys control which Bitcoin. When your client "owns" Bitcoin on an exchange, they're trusting the exchange to:
Actually have the Bitcoin they claim to have (not running fractional reserves),
Not freeze or restrict the account,
Properly secure the Bitcoin against hackers,
Not go bankrupt or get shut down by regulators, and
Not have assets seized by governments.
For many Bitcoin holders, this defeats the entire purpose of owning Bitcoin.
Self-custody means your client holds their own private keys, typically using a hardware wallet (a physical device like a Foundation Passport or Coldcard). They generate a "seed phrase" - a set of 12 or 24 words that serves as the master key to their Bitcoin. With self-custody, they control their Bitcoin directly on the Bitcoin network, with no intermediary that can freeze accounts, go bankrupt, or lose their funds. The trade-off is personal responsibility: if they lose the seed phrase, there's no customer service to call. If someone steals it, the Bitcoin can be stolen irretrievably. If they die without leaving inheritance instructions, their heirs may never be able to access the Bitcoin. But for clients with $100k+ in Bitcoin, many decide this trade-off is worth it - they'd rather be responsible for their own security than trust another exchange after watching FTX collapse.
This is where advisors face a practical challenge: your clients with significant Bitcoin holdings need to consider self-custody, but you don't have time to become a hardware wallet expert. You can't confidently guide them through seed phrase backup, recovery testing, and inheritance planning - that's not your expertise and can create liability if you provide incorrect technical advice. That's the gap Connelly Bitcoin Partners Inc. fills. We offer white-label self-custody implementation services, where we guide your clients through the entire technical setup, test their backups, coordinate inheritance planning, and provide ongoing support. You handle the financial planning and investment advice; we handle the technical implementation of "taking custody of their keys." Your client gets expert guidance on self-custody, you demonstrate comprehensive service without becoming a Bitcoin expert, and everyone's role remains clear. When your clients say "not your keys, not your coins," you can say "I work with a specialist who handles exactly that."
