Back to blogs
Crypto Mortgage
What’s the best way to store your crypto collateral?
By Colin McMahon
February 20, 2025 • 6 min read

Where you store your crypto matters—especially if you’re using it as collateral for a loan. The right custody method impacts not just security but also how easily you can access funds, whether you control your private keys, and how lenders treat your assets.
From cold wallets to multisig setups, rehypothecated custody, and exchange storage, there are different ways to hold your crypto. Each has its advantages and trade-offs depending on whether you prioritize control, liquidity, or institutional-grade security.
Cold wallets
What is a cold wallet?
A cold wallet keeps crypto completely offline, making it immune to hacks or exchange failures. These include hardware wallets like Ledger and Trezor, as well as paper wallets that store private keys physically.
Why investors use cold storage
- Full control – You hold the private keys, meaning no third party can freeze or restrict access.
- Protection from cyberattacks – Since cold wallets are offline, they’re not vulnerable to hacks.
- Long-term security – Ideal for investors who don’t need frequent access to their funds.
Drawbacks of cold storage
- Inconvenience – Transferring funds requires reconnecting the wallet.
- Key management risks – If private keys are lost, there’s no recovery method.
For long-term investors and those securing large amounts of Bitcoin or Ethereum for lending, cold storage remains the safest option.
Multisig wallets
How multisig wallets work
A multisignature (multisig) wallet requires multiple private keys to approve transactions. For example, in a 2-of-3 setup, two out of three key holders must sign off on a transaction.
Why multisig is useful for lending and security
- Prevents single-point failure – Even if one private key is compromised, funds stay secure.
- Common for institutional custody – Many exchanges and crypto lending platforms use multisig for asset protection.
- Adds an extra layer of protection – Ensures crypto can’t be moved without multiple approvals.
Challenges of multisig wallets
- Keyholder dependency – If enough signers lose their keys, access is lost.
- Complexity – Setting up and managing multisig wallets requires technical knowledge.
For businesses, institutions, and crypto lending platforms, multisig offers a middle ground between full control and shared security.
What is rehypothecated crypto, and why does it make investors nervous?
How rehypothecation works in crypto
Rehypothecation means a lender reuses the crypto collateral borrowers provide. It’s a common practice in traditional finance—banks lend out deposits to generate returns. But in crypto, where trust and regulation are still evolving, it’s a riskier proposition.
Why some platforms rehypothecate collateral
- Maximizes liquidity – Platforms can use borrower assets to generate yield.
- Lower interest rates – Some lenders pass the yield onto borrowers as lower loan rates.
- Modeled after traditional finance – Banks have done this for years, but with regulatory backing.
The risk: crypto isn’t as regulated as banks While banks have FDIC insurance, government oversight, and capital reserves, crypto platforms largely don’t. That’s why failures like Celsius and BlockFi led to massive losses for depositors—rehypothecated assets were no longer retrievable when liquidity ran dry.
Is rehypothecation always bad? Not necessarily. As the industry matures and transparency improves, rehypothecation could become safer. However, for now, many investors prefer platforms that do not rehypothecate their collateral, ensuring their assets remain untouched in secure custody.
Crypto held on exchanges
Why do some investors store crypto on exchanges?
Exchanges like Binance, Kraken, and Coinbase make it easy to buy, sell, and hold crypto. Many investors keep their assets on exchanges for quick liquidity and trading access.
The risks of exchange storage
- Not your keys, not your crypto – If an exchange collapses (e.g., FTX, Mt. Gox), users can lose their assets.
- Hacking risks – Exchanges are prime targets for cyberattacks.
- Regulatory uncertainty – Governments can freeze exchange-held assets or impose new withdrawal restrictions.
Why most lenders don’t accept exchange-held crypto as collateral
When applying for a crypto-backed mortgage or Bitcoin loan, lenders typically require crypto to be transferred to a secure, non-custodial account. This ensures the collateral isn’t exposed to exchange failures or unauthorized access.
Milo’s cold storage and non-rehypothecation model
For borrowers looking to secure a crypto mortgage or BTC loan, the custody model of the lender matters. Milo uses an institutional-grade approach that aligns with best practices in crypto custody and lending security.
How Milo ensures collateral security
✅ Cold storage custody – Crypto is held in offline, secure vaults with BitGo and Coinbase Custody, both known for their institutional-grade security. ✅ Non-rehypothecation – Unlike some platforms, Milo does not lend out or leverage customer collateral. Your assets remain protected and available. ✅ Institutional-grade infrastructure – Uses regulated custodians to ensure safety, trust, and compliance.
Why this matters for borrowers
- Peace of mind – Your Bitcoin or Ethereum collateral remains secure throughout the loan.
- No exposure to platform failures – Since assets aren’t rehypothecated, there’s no risk of losing collateral to liquidity issues.
- Full transparency – Borrowers always know exactly where their collateral is stored.
By prioritizing security over leverage, Milo offers a safer way to unlock liquidity with BTC and ETH while ensuring collateral remains intact.
Which storage method is right for you?
The best way to store your crypto collateral depends on your priorities:
- For maximum security: Cold storage keeps your assets safe from hacks and exchange failures.
- For shared control: Multisig wallets provide extra security, especially for institutions.
- For earning yield: Rehypothecation can be beneficial in certain scenarios, but many investors remain cautious.
- For quick access: Exchange storage is convenient but carries risks.
- When considering a crypto loan or Bitcoin-backed mortgage, choosing a lender with a secure custody model is just as important as selecting the right storage method.
Milo’s cold storage and non-rehypothecation model, backed by BitGo and Coinbase Custody, ensures borrowers have a secure and transparent way to leverage their crypto without added risk.
The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.
Author

Colin McMahon
Loan Consultant Sales Team Lead
Stay up to date on mortgage trends
Sign up to our newsletter for the latest insights on the housing market in the U.S.