Glossary · Custody & Security
Warm Wallet
Also: warm storage, warm wallets
Published
Warm Wallet — A warm wallet is a custody tier in which key material is protected by controls such as multi-party computation and policy approval but can sign transactions within minutes, so that an institution can settle trades and payments during the day without exposing its long-term holdings. It sits between hot wallets and cold storage.
Why a Middle Tier Exists
Cold storage is secure but slow; a hot wallet is fast but exposed. Settlement flows need something in between: balances that can move on the same day, under controls strong enough for institutional risk policies. A warm wallet supplies that, typically with key shares held under multi-party computation across separated environments, an approval workflow, address allow-lists, and per-transaction and daily limits.
How It Is Used
A liquidity provider funds its warm wallets with the balances required for the day's expected settlements and replenishes them from cold storage on a schedule. Client withdrawals, stablecoin settlement, and on-chain delivery of trade legs run from the warm tier. Anything beyond the tier's limits waits for a cold-storage procedure.
What to Ask a Counterparty
Which share of assets sits in each tier, how limits are set and approved, who can change an allow-list, and what monitoring covers the warm tier are the questions that determine whether a counterparty's warm wallet is a controlled settlement account or an exposure.