Do Bitcoin ETFs Remove Custody Risk? Analysts Disagree

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.

Woo then posted the numbers: 1.57 million BTC lost through self-custody, 1.51 million on exchanges and none through custodians of spot ETFs. The figures came from a December 2025 report by River. A modern regulated custodian, he wrote, does a better job than “moms and pops at home.”

The security advocate replied that ETFs haven’t existed long enough to suffer a catastrophe, and that nearly all of them use the same custodian. He then asked if Woo would rather have risk spread across thousands or millions of amateur custodians, or concentrated with one professional.

Coinbase Custody, which most spot ETFs use, has gone more than eight years without losing coins, Woo pointed out, while self-custody lost 136,000 BTC and exchanges 13,000 BTC in that time. He called the choice a false one: a person’s own self-custody and a professional custodian each depend on a single party doing its job, and the custodian wins because of lower risk of physical coercion through acts like wrench attacks.

Coinbase’s Record Is Contested

Lopp’s next reply called the never-lost-coins claim one that “seems to be in dispute,” pointing to Ari Paul’s recent allegation against Coinbase.

As CryptoPotato reported in September, the BlockTower Capital founder posted on X that Coinbase had “lost” $25 million belonging to his firm years ago and later alleged that it had covered up repeated hacks, affecting at least a dozen other firms and more than $1 billion.