The $130 million Coldcard hack has reignited a fundamental debate in institutional crypto: who should actually hold the keys to bitcoin? A flaw in Coldcard firmware shipped in March 2021 silently bypassed the device's hardware randomness chip, generating weak cryptographic keys that sat exposed in public code for five years before discovery. The theft affected more than 5,200 addresses, draining roughly 2,000 bitcoin according to Galaxy Research's on-chain tracking.

The immediate aftermath revealed a stark institutional divide. U.S. spot bitcoin exchange-traded funds (ETFs), which allow investors to hold bitcoin exposure through traditional brokerage accounts without managing private keys themselves, took in $626 million in the days following the exploit, according to Bitcoin Magazine. For many holders spooked by the vulnerability, Wall Street custody felt safer than managing their own security.

Yet the purists pushed back hard. Jameson Lopp, co-founder of Casa, a cryptocurrency custody platform, and security researcher, argued that the hack should not shake confidence in self-custody, noting that custodians themselves rely on random-number generators and face their own risks. Early Bitcoin Core developer Peter Todd was more direct, stating that "self custody has a much better track record than third parties".

Why Neither Pure Self-Custody nor Centralized Custody Solves the Problem?

Michael Tanguma, co-founder and chief executive of bitcoin platform Onramp, spent years inside the custody industry before starting his company, most recently at collaborative-custody firm Unchained Capital. He sees a critical flaw in both approaches. "There's a single point of failure whether it's Coinbase or yourself," Tanguma explained. The ETF migration concentrates coins with a handful of custodians; Coinbase alone holds $77 billion in custody assets, creating what Tanguma calls a "honeypot" risk. Meanwhile, hardware wallets swap that centralized risk for vendor mistakes, as the Coldcard bug demonstrates.

"If you centralize an asset that's supposed to be decentralized, you will effectively kneecap it," said Michael Tanguma, co-founder and chief executive of Onramp.

Michael Tanguma, Co-founder and Chief Executive, Onramp

Tanguma argues that the market must evolve beyond 2012-era custody practices. "The market has to level up because the game is changed and how people manage this asset in 2012 is how they do it today, and it fundamentally won't work," he stated. Self-custody, he adds, is "increasingly going to be untenable" for most people because security is now "a moving target." A holder can buy a new device and roll dice for entropy, but "there has to be another way, or it just won't get adopted".

Tanguma

How Multi-Institution Custody Offers a Third Path

Onramp's answer is what it calls multi-institution custody, a model that splits control across multiple independent regulated companies. Here's how the approach works:

• Distributed Key Holding: Independent regulated companies including BitGo, Coincover, and Tetra Trust each hold one cryptographic key, and no transaction moves without a quorum of them signing off on it.
• Client Retains Legal Title: The client keeps legal ownership and is the only party who can initiate a withdrawal, which requires separate video verifications, liveness checks, and screening for duress.
• No User-Generated Entropy: There is no seed phrase for the customer to generate, eliminating the risk of user error in creating weak keys, and no firmware to keep patched.
• Insurance Backing: The vaults sit behind a $100 million insurance facility from Lloyd's of London, arranged in 2025 to cover risks including internal collusion.

Tanguma's claim is narrow but significant: "there's never a point of failure where I or the institution can move or lose the asset". The onboarding process takes just a couple of minutes, with everything handled in the background. Multi-institution vaults start around $100 per month, and a free tier parks coins with BitGo alone for those just starting out.

The model has already attracted institutional interest. In late 2024, pension consultancy Cartwright selected Onramp to custody the first bitcoin allocation by a UK defined-benefit pension scheme, after screening 69 managers. Onramp says it now holds more than $1 billion in bitcoin with zero security incidents, though this figure is self-reported and unaudited.

It is worth noting that Tanguma is talking his book. Onramp raised a $12.5 million Series A at a $135 million valuation in May, led by Early Riders, a bitcoin venture firm where Tanguma is himself a partner, a detail the funding coverage did not mention. The company's "Back to Basics" education campaign launched two weeks before the exploit, so the timing flatters him, though Tanguma says Onramp has held back its own podcast clips criticizing hardware wallets because "it's not a good tack to be dancing on graves".

What Do Competing Custody Models Offer?

Casa and Unchained Capital make a similar no-single-point-of-failure argument, except the customer keeps their own keys. Both came through the Coldcard exploit with zero customer losses. However, Tanguma claims that model hits a ceiling: setting up concierge multisig "would take weeks and weeks, and people didn't understand it". Lopp draws the opposite conclusion from the same hack, arguing that "if you want to hedge against vendor risks and supply chain risks, the solution is multi-vendor multisig".

The debate matters because bitcoin is increasingly held in retirement accounts, trusts, and pension schemes. Tanguma points out that "no custodian has lasted thirty years," and neither have hardware vendors. "How are you gonna plan for fifty years," he asked of dynasty trusts built on one custodian. This long-term institutional perspective shifts the conversation from individual security preferences to systemic resilience.

Tanguma

Coinbase's Brian Armstrong has urged the industry to fix the quantum-computing threat for a related reason: it is another flaw that would surface all at once, affecting all holders simultaneously. "We have to build out the infrastructure that's needed for institutions," said Nirup Ramalingam, chief executive of BridgePort, on the On The Margin podcast.

For shaken holders, Tanguma's advice is blunt: the people who got into bitcoin in 2012 and 2013 "were early to Bitcoin, but they fundamentally do not have a position or credibility to tell you how to manage" a family's wealth. "Slay your heroes, you gotta be thinking for yourself," he added. Yet he also acknowledged a hard truth: "In reality, grandma couldn't do it". That gap between what early adopters managed and what ordinary people can realistically handle is precisely what institutional custody infrastructure must solve.