Did you know that your exchange might be the next target for hackers?

While reading this, someone is trying to break into a cryptocurrency exchange like yours. Don’t panic. Here’s the twist: Most of the scams occur when crypto exchange stores assets online.

So, what’s the smartest way to stay safe? Go offline.

I mean, use Cold wallets, which store assets offline. They are a hidden shield trusted by top exchanges to protect users’ funds, build trust, and improve revenue. But is it true? 

Yes, we’ve listed some of the leading companies in this blog; other than that, you’ll see what exactly the cold wallet is, why you need it, how to integrate it into your exchange, what the benefits are, and even the mistakes you should avoid while implementing. Don’t miss the budget estimation and success stories at the end! 

Curious? Read more!

What is a Cold Wallet?

A cold wallet is an offline crypto storage method used by exchanges to protect users' private keys from online threats. It is designed for long-term holders and crypto platforms that prioritize security over frequent access. Key features include offline key management and isolation from internet-connected systems. Cold wallets offer strong protection against hacking, reduce exposure to cyberattacks, and are ideal for securing large crypto reserves. However, they require careful liquidity planning to avoid transaction delays.

Why Every Exchange Needs Cold Wallets?

In today's unpredictable cryptocurrency market, security is not just a feature, it is necessary for every exchange. Here’s the shocking news:

“On February 21, 2025, North Korean hackers stole $1.5 billion of Ethereum from the Dubai-based crypto exchange called ByBit, the largest cryptocurrency theft in history.”

It clearly shows that a crypto exchange needs an extra layer of safety. For that, you should integrate a cold wallet, because its offline storage protects funds from online attackers. It helps exchanges greatly reduce the danger of cyber theft and store a large portion of customer funds in cold storage.

A cold wallet also does something unique other than preventing assaults.

If your exchange has a cold wallet, it notifies users that their funds are stored safely. It makes the user feel secure about their assets, and it builds trust among them. 

Cold Wallet Integration for Exchanges: Steps & Benefits

Cold wallet integration for exchanges includes selecting a wallet, safe asset allocation, and developing manual transfer protocols with multi-signature access. Let’s break down this process into simple steps:

Step 1: Select a wallet

First, choose a trustworthy cold wallet solution depending on your platform's needs. Hardware wallets are the most popular because of their usability and strong security. 

Step 2: Allocate the asset

Most exchanges follow a split.

• 98% in cold storage for long-term holdings.
• 2% in hot wallets for daily transactions and withdrawals.

This percentage can be customized according to user demand and transaction volume. 

Step 3: Start Withdrawal from Exchange

Open a cryptocurrency exchange account. Go to the "Withdraw" or "Send" section of your exchange. Select the crypto you wish to send.

Step 4: Create a secure transfer protocol

Develop a manual transfer process for hot and cold wallets:

• Multiple-signature approval
• Specialized offline devices
• Timed withdrawal batching

Step 5: Create a cold wallet management tool

Collaborate with your development team to provide safe tools for:

• Tracking cold wallet balances
• Generate deposit addresses
• Triggering emergency transfers

Step 6: Test, Audit, and Go Live

Before launching, carry out thorough internal audits and security tests. Consider having a third-party security company evaluate your cold wallet integration setup.

Benefits of Cold Wallet Integration

By integrating a cold wallet into your exchange, you will get more benefits, such as:

Strong asset security

Cold wallets protect against remote assaults, malware, and insider risks, ensuring user trust and your reputation.

Regulatory Compliance 

Custodial exchanges in locations such as the United States, the European Union, and Singapore frequently require advanced storage methods.

Enhanced Brand Trust

Users are more willing to trade on an exchange that properly uses cold storage. It is a confidence builder for users.

Insurance Eligibility

Some cryptocurrency insurance companies demand cold storage techniques before offering coverage. 

5 Mistakes to Avoid in Cold Wallet Implementation

If you want the above-mentioned benefits, you should avoid these mistakes while integrating a cold wallet:

1. Stop using unverified hardware wallets

Poor or unfamiliar hardware may include flaws or lack necessary internal software upgrades. Always use trusted cold wallet providers for wallet security. 

2. Insecure private key handling

If your crypto private keys are not properly backed up or not available to a large number of individuals, your cold wallet setup has already been hacked. Implement multi-signature access and air-gapped backups.

3. Missing regular audits

Failure to regularly audit your cold wallet system might result in hidden threats. Perform internal and third-party security audits to ensure compliance and security.

4. Poor access controls

Use multi-factor authentication to restrict cold wallet access to a small group of trusted people. Do not store credentials on linked systems or shared drives.

5. Lack of safety procedures

It is essential to have a backup plan in case your cold wallet device is missing, stolen, or damaged. A clear disaster rescue strategy confirms that your assets are recovered carefully and on time.

Budget Estimation to Add Cold Wallet to Your Exchange

The cost of cold wallet integration is around $50 to $250, depending on the features and security level. Additionally, there may be fees for transferring cryptocurrency from a hot wallet to a cold wallet, however, these are usually blockchain network fees rather than wallet provider fees. 

The primary cost of using a cold wallet is to buy the hardware device. These devices look like USB drives and come in different versions. Each model has unique features and levels of protection, which influence the price. 

Usually, this process involves purchasing the hardware item just once. There are no software development or integration expenses involved while integrating a cold wallet.  

Use Cases of Top Exchanges Integrating Cold Wallet

Top crypto exchanges protect digital assets using cold wallets, which are considered the most secure option. They hold cash offline, providing strong security against cyber risks. This strategy makes cold wallets an essential component of today's crypto exchange security architecture. Here are the leading exchanges that implement cold wallets:

Binance

Binance protects the majority of user funds via a multi-tier cold storage system. Only a limited portion remains in hot wallets to support active trading and withdrawals. This strategy greatly reduces the chance of large-scale hacking.

Coinbase

Coinbase maintains 98% of its customers' assets in offline cold wallets that are globally distributed. Their approach not only improves security but also qualifies for crypto asset insurance, which provides an additional layer of customer funds protection.

Kraken

Kraken uses air-gapped cold storage, which demands manual and multi-party approval for all asset movements. This guarantees compliance with worldwide crypto standards while maintaining tight control over custodial assets.

Conclusion

Are you planning to reach success like the top exchanges mentioned above? Then you should consider integrating a cold wallet into your exchange. This wallet helps you protect all user funds and build a strong reputation among users. 

To grab this opportunity, you need a trustworthy partner that helps you with the entire process. Here’s where Hashcodex enters, a reliable crypto wallet development company. We provide fully customizable solutions with advanced features. Our professional developers ensure that every project is safe, functional, and built to satisfy business requirements. 

Contact us to place your user’s funds in safer hands!