When Binance reopened withdrawals after the $6.3B hack, many customers moved their coins and tokens off the exchange.
DefiLlama data showed about $12.16B in net outflows over seven days before the flow turned to about $3.25B in net inflows over 24 hours by November 3, Bitcoin.com reported.
The same report cited a post on X in which Binance co-founder Changpeng Zhao said that, according to public reports, “only 6-10% of withdrawals went to other CEX [centralized exchange competitors],” with most of the rest going to self-custody wallets.
The move made sense to anyone who had just watched an exchange lose $6.3B, since a wallet whose keys sit with its owner cannot be emptied by a breach at Binance.
It also rests on an assumption that the hack itself called into question, which is that holding the keys means holding full control.
Leaving the exchange moves the risk onto the holder
Binance’s customers have not had to bear the loss, since the exchange said it had replaced about 95 percent of the affected assets by November 1 using its emergency fund, excess reserves from its futures insurance fund, and its corporate treasury, crypto.news reported.
That backstop is what a customer gives up when coins move to a personal wallet.
“Self-custody removes exchange counterparty risk, but security falls entirely on the holder, and there is no one to call if a key is stolen,” Jeff Ramson, founder of private investment firm ProActive Capital Group, told The Sociable. “An exchange adds a counterparty, though Binance has pledged to cover customer losses here.”
The numbers on individual losses show how common that situation already is. Chainalysis counted 158,000 personal wallet compromises affecting at least 80,000 victims in 2025, with $713M stolen from individuals, according to figures The Block reported last December.
Personal wallets carry weak points of their own
Self-custody also depends on the hardware and software that hold the keys, and both have failed in the past year.
In October, cybersecurity and fintech company Ledger said an implant found in devices sold through a reseller in Asia read the 24-word recovery phrase from the screen during setup and sent it out over a mobile network, and it asked resellers in seven Asian markets to pull devices from their shelves, Decrypt reported.
Decrypt also reported that European retailer MediaMarkt Saturn stopped selling Ledger devices after a customer in Germany reported finding an implant, although no loss of funds was reported in that case.
Software wallets face a similar exposure. Last December, a compromised update to Trust Wallet’s Chrome extension drained about $7M from 2,596 wallet addresses, and Trust Wallet, which Binance acquired in 2018, pledged to reimburse affected users, Bleeping Computer reported.
Even with a decentralized wallet, then, the victims were compensated only because a company chose to pay.
Holding the keys does not stop a stablecoin freeze
For holders of stablecoins such as USDT by Tether and USDC by Circle, moving coins to a personal wallet does not end the issuer’s control over them.
“Investors need to understand that custody and control are two different things,” Ludovico Rossi, co-founder of tokenization technology company Brickken, told The Sociable. “And with centrally issued stablecoins, even self-custody doesn’t guarantee unrestricted control. The issuer can still freeze tokens at the contract level.”
The reason lies in how these tokens are built. A stablecoin is run by a smart contract that its issuer controls, and in Tether’s case that contract stores a blacklist of addresses “for which the contract refuses to move tokens,” a list that only Tether can change, according to a blacklist explainer by blockchain security firm BlockSec. The block applies to the address itself, so the owner of a frozen wallet can still sign a transfer with their private key, while the contract will not carry it out.
Tether’s own record shows how often that power is used. In 2025 it blacklisted 4,163 addresses on Ethereum and Tron and froze about $1.26B in USDT, permanently destroying $698.42M of it, while only 3.6% of the addresses blacklisted that year were removed within the year, according to BlockSec’s 2025 analysis. Those figures suggest that once an address is blocked, its owner rarely gets it back.
For businesses that build on stablecoins, the question is how predictably that power is used. “For institutions, the concern is predictability. If billions of dollars can be immobilized in minutes, you need to know exactly what triggers that decision, who is accountable and how quickly an error can be corrected,” Ryan Kirkley, co-founder and CEO of Global Settlement Network, which builds infrastructure for stablecoin settlement, told The Sociable.
Bitcoin and Ether work differently, since native assets such as BTC and ETH cannot be frozen unless they are held on a centralized platform such as an exchange. That protects holders from an issuer freeze, but it also means that if their Bitcoin or Ether is stolen, no company can freeze it in the thief’s wallet.
The right choice depends on which risk an investor can manage
Kirkley does not see either option as the safe one. “I wouldn’t frame this as exchanges being unsafe and self-custody being the answer. Both come with risks, and the right choice depends on what an investor is actually equipped to manage,” he said. “The real question isn’t simply where your assets sit. It’s how much risk you’re taking at every point between holding, transferring and recovering them.”
Rossi argues that the issuer’s power should be part of that assessment from the start. “Investors should be asking who can restrict their assets, under what circumstances and what recourse they have if a decision is made incorrectly. Those questions matter just as much as liquidity, yield or convenience,” he said.
Ramson reduces the decision to a trade-off each holder has to make for themselves, saying, “Investors should decide which of those risks they would rather carry.”
The customers who moved their coins and tokens off Binance after the reopening stopped depending on an exchange’s security and on its willingness to pay when that security fails.
In their own wallets, their crypto depends instead on hardware and software that can be compromised even when the owner follows every precaution while any USDT or USDC they hold remains subject to Tether and Circle wherever it sits, so self-custody changes the risks they face without giving them full control over their assets.
Image Source: AI generated with ChatGPT
