Freewallet, a hosted crypto wallet service that offers standalone storage services for crypto, has just been attacked on Twitter by Elon Musk.
Regarding the way Freewallet operates, Musk said: “Your app sucks. Any crypto wallet that won’t give you your private keys should be avoided at all cost.”
But he is not the first one, as hosted crypto wallet platforms have often been criticized for how they operate regarding private keys. It’s how the slogan “not your keys, not your coins” came to be.
If you store private keys on third-party platforms, it seems that, as a crypto owner, you would have an increased risk of having rogue actors gaining access to your information and, thus, compromising the wallets.
Freewallet responded to this criticism by saying that being a hosted wallet helps the provision of “bank-level” services when it comes to security and customer support:
“The accusations relating to this fact are never followed by a support ticket. People saying ‘stay away from Freewallet’ express prejudice towards custodial wallets because they believe that a ‘true’ blockchain wallet is supposed to leave the management of private keys to the user (no). However, there are other services (like exchanges) that have access to user private keys.”
Despite being advised to use self-hosted crypto storage, some investors continue to trust their coins to third-party service providers. In fact, 92% of institutional investors keep their crypto on exchanges.
Self-hosted wallets are also gaining attention from governments, including the U.S., where, in late 2020, the U.S. Treasury proposed KYC rules for any withdrawal from an exchange to an unhosted wallet.