Why hot wallets draw more caution
A hot wallet is connected to a network so that transactions can be signed quickly. That convenience is also its weakness, because anything reachable from the internet can be targeted. Underwriters therefore tend to apply lower limits to hot wallet balances, or ask that the balance be held to the amount operations truly require.
Why cold storage is not automatically safe
Offline keys remove one category of attack, but they introduce others. Underwriters ask who can retrieve the keys, how many people must approve a transfer, where the physical or hardware media is kept, how backups are protected and what happens if an approver leaves the firm. A cold storage setup with one person holding all the keys is viewed very differently from a distributed arrangement with documented procedures.
Insiders and social engineering are the common weak points, so controls on people and process often count for as much as controls on technology.
The controls underwriters like to see
Strong submissions usually describe their controls plainly and back them with documentation. The following are the items most often discussed.
- Multi-signature or multi-party approval for transfers above a set threshold.
- Hardware security modules or comparable key protection.
- Geographic and organizational separation of key holders.
- Withdrawal allowlists and time delays for large transfers.
- Regular testing of recovery procedures and access reviews.
- Independent security assessments or audits.
Preparing your submission
Put the custody architecture on one or two pages, showing the percentage of assets in each storage method, who holds each key, how approvals work and how often controls are tested. Include any third party custodian relationships. A clear picture usually shortens the underwriting conversation and tends to lead to firmer terms.
Last updated October 22, 2026. Written by the Alton Risk placement team.