How much should I keep in a hot wallet versus cold storage?

The full answer

What regulators mean by hot and cold storage

FINRA, the US broker-dealer regulator, defines hot wallets as wallets connected to the web through software on a phone or computer. Cold wallets, in its definition, are paper or hardware devices that generally aren’t connected to the internet [1]. FINRA’s investor guide says hot wallets are convenient, because access is usually through an ordinary password. It also says that “like any service connected to the internet,” hot wallets “are vulnerable to hackers and malicious code” [1].

Cold wallets “tend to be better for long-term storage and more difficult for malicious actors to hack,” the same guide says, because they are disconnected from the internet [1]. FINRA adds a warning about that offline side. Hardware wallets “can break down, suffer functionality defects or get lost or stolen,” and they “aren’t totally immune from sophisticated hacking techniques.” Funds behind a paper wallet can be destroyed or lost [1]. The page on the difference between hot, cold and paper wallets covers each type in more detail.

Whether any authority sets an amount for each

The guidance below describes what each kind of storage is for. None of it gives a figure or a ratio. XRPL.org, the XRP Ledger’s documentation, describes keeping an account’s master key “enabled but offline.” That way no one can reach it over the internet, and the owner can still find it in an emergency [2]. In a public service announcement on September 3, 2024, the FBI said not to store seed phrases, private keys or wallet logins on internet-connected devices [3].

Canada has a split rule for platforms. On September 8, 2025, the Ontario Securities Commission’s investor site said a registered trading platform may not hold all its clients’ crypto in its own hot or cold wallets. It must use a third-party custodian holding at least 80% of client crypto [4]. That rule applies to the platform, not to a person holding their own XRP.

What cold storage does not protect against

Offline storage protects the key. The ledger then acts on whatever that key signs. XRPL.org says digital signatures are the only way to authorize XRP Ledger transactions, and no administrator can undo one after it has applied [2]. The FBI’s crypto crime page says transactions “are irrevocable” [5].

FBI Denver warned on April 26, 2024, about address poisoning. The FBI said in April 2024 that criminals send tokens from addresses that closely resemble one the victim has corresponded with before, so the first and last few characters might be identical to a familiar address, and it advised checking the entire address before sending [6]. Malicious signing requests and wallet drainers exploit the same point: the holder approves something they did not intend.

A device is also only as isolated as its recovery phrase. D’CENT, a wallet maker, says in its app FAQ that if a hardware wallet’s phrase was ever entered into an app or other software wallet, “the two wallets share the same private keys and the hardware wallet should not be treated as isolated” [7].

The backup is the third weak point. The US National Institute of Standards and Technology wrote in February 2021 that anyone who finds the seed words can restore the tokens. It added that “both paper and digital backups of the seed phrases can be lost, stolen, or destroyed” [8]. XRPL.org says no one can restore access to an XRP Ledger account if something goes wrong [9].

How coercion risk bears on what is kept within reach

Ledger’s CEO wrote on December 21, 2020, after a customer data leak. He advised against keeping the recovery sheet in a safe at home and called a bank vault much more secure, saying “not having immediate access to your backup increases your resilience to physical threats” [11]. TRM Labs wrote on May 23, 2025, that multi-signature wallets make it “much harder for coercion alone to succeed.” It also advised holders to avoid publicly linking their identity to their wallet addresses [12]. The page on physical attacks on crypto holders covers the cases.

Moving XRP between hot and cold

Every move between a hot wallet and a cold one is a transaction that cannot be reversed [2][5]. The full-address check FBI Denver describes applies to each of them [6]. The steps are set out in moving XRP from an exchange to your own wallet without losing it.

Splitting the cold portion

Splitting helps only when the parts don’t share a phrase, as D’CENT’s FAQ shows [7]. Trezor, a hardware wallet maker, documents a split backup. In a two-of-three scheme one lost share leaves the wallet recoverable, while losing enough shares to fall below the threshold makes it unrecoverable [13]. NIST says multi-signature wallets can restore access after keys are lost, as long as enough keys remain to meet the requirement [8]. The trade-offs are covered in spreading XRP across several exchanges and wallets.

The case against moving most holdings into cold storage

The strongest objection is lockout. The US Federal Trade Commission says that if a holder loses the password to a digital wallet, no one is likely to be able to step in and recover the funds [14]. A Rotfleisch & Samulovitch article published on Mondaq on June 15, 2026, said that beneficiaries may be unable to recover crypto if keys and recovery phrases are lost or unavailable at death. It added that multi-signature wallets can complicate estate administration when succession steps are not documented [15]. The ways holders lose XRP without anyone hacking them are set out on a separate page.