Custody refers to a financial institution holding client assets to prevent them from being stolen or lost. Custodians are different from banks as they can not leverage the assets they hold to their own ends.
What is Custody?
In the cryptocurrency industry, custodial solutions are a third party that holds the private keys to the user’s funds. They are the only ones able to actually send and receive the user’s coins. Virtually all exchanges use a custodial approach since it allows them to provide a better user experience.