Do Bitcoin ETFs Remove Custody Risk? Analysts Disagree

Lopp says ETFs are too new to have faced a catastrophe, and nearly all share one custodian. The question: thousands of amateurs or one pro?

Jameson Lopp has argued that no type of Bitcoin loss is solved by handing the asset to a third party.

It led to a spat with analyst Willy Woo and other X users over whether professional custodians are safer in practice than individuals holding their own keys.

A Custody Argument Plays Out on X

In a post on the social platform, Lopp took aim at the claim that an ETF removes the worry of losing BTC.

“There is objectively NO type of loss that can be solved by giving your bitcoin to a third party,” he wrote. “Third party custody is exposed to every self custody risk PLUS MORE!”

A user named Dima conceded that custodians carry every individual risk plus counterparty risk, but countered that most people are undone by their own mistakes, such as lost seed phrases and phished wallets. Furthermore, some ETF custodians now offer bankruptcy-remote segregation, meaning customer assets are kept apart from the firm’s own, which exchanges once lacked.

Lopp rejected the idea that most people can’t self-custody, suggesting they just aren’t willing to put in the effort, and said that segregation “doesn’t do jack if the underlying asset is lost.” He used his firm, Casa, as an example, noting that it has many older clients and consultants who do the work for them.