How to choose a crypto wallet: types, security and advantages
"Not your keys, not your coins" is the mantra of self-custody. After bankruptcies like FTX, Celsius and Voyager, the importance of having your own wallets was demonstrated. But which one to choose and what tax implications does it have?
Types of wallets
1. Exchange wallet (third party custody)
Exchanges store your crypto on their behalf. You have an account, not the private keys.
Advantages: Easy to use, you regain access if you lose your password, technical support.
Risks: If the exchange goes bankrupt, everything can be lost (like FTX). Hacks. Mandatory KYC.
Tax implications: The exchange can report your operations to the Treasury. Easy to export history in CSV.
2. Hot wallet (software wallet)
An application on your mobile or PC that saves private keys on your internet-connected device.
Examples: MetaMask (Ethereum/EVM), Phantom (Solana), Trust Wallet (multi-chain).
Advantages: Self-custody, quick access, free, DeFi compatible.
Risks: If your device is hacked or malware steals the keys, you lose everything.
Tax implications: You keep the record of operations. There is no automatic CSV: you have to export from blockchain explorers.
3. Cold wallet (hardware wallet)
Physical device (such as a pendrive) that stores private keys offline.
Examples: Ledger (Nano X, Nano S+), Trezor (Model T, Safe), Foundation Passport.
Advantages: Maximum security. Even if your PC is infected, the keys never leave the device.
Risks: Cost (€40-200). If you lose the device AND the seed phrase, you lose everything permanently.
Tax implications: Ditto hot wallet. History only available via blockchain explorer.
4. Multisig wallets
Wallets that require multiple signatures to authorize transactions. Used by companies and large investors.
Advantages: If a key is compromised, funds remain safe.
Risks: More complex to manage.
Which one to choose according to your profile?
| Profile | Recommendation |
|---|---|
| Beginner, few crypto | Exchange + small hot wallet to try |
| Average investor | Hardware wallet + exchange for trading |
| Long-term investor (holder) | 100% hardware wallet, seed phrase in safe place |
| Active DeFi | Hot wallet (MetaMask) + hardware as signer |
| Company | Multisig |
The seed phrase: the most important thing
The seed phrase (12 or 24 words) is the master key of your wallet. With it, you can recover your wallet on any compatible device.
How to save it:
- Never digitally (photo, email, cloud, password manager).
- On paper, in several safe places (home + safe).
- There is a metal solution: stainless steel plates to resist fire or water (Cryptosteel, Bilodl).
Tax implications of self-custody
If you have crypto in your own wallets:
- There is no automatic report to the Treasury: The tax obligation falls 100% on you.
- Manual registration: You must export blockchain history (Etherscan, BscScan, etc.) to calculate your profits and losses.
- Transfers between your own wallets: These are not taxable events, but you must document them to prove that you are the same owner.
- Form 721: If the wallet is in a foreign exchange and exceeds €50,000, possible obligation. If it is your own wallet, it does not fit into Model 721 (there is no foreign provider).
Migrate from exchange to cold wallet: step by step without tax errors
- Open a hot wallet and/or hardware wallet.
- Write down and save the seed phrase in a safe place.
- Generate the destination address.
- Do a small test transfer first.
- Record the transaction: it is your own transfer (not a taxable event).
- Export exchange history before withdrawing (many exchanges delete data from closed accounts).
Updated: April 2026 | Fiscal year: 2025