Security and Compliance Reminders for Non-Custodial Bitcoin Wallet Builders
Building a non-custodial Bitcoin wallet protects you from direct custody liabilities but it does not exempt you from all operational and legal responsibilities.
As a company building on Bitnob infrastructure, you must still plan carefully around:
User data protection (privacy laws like GDPR, CCPA)
Transparency and risk disclosures
Infrastructure security
Optional licensing issues depending on jurisdiction
Mitigating legal misunderstandings about "custody"
This section will help you avoid costly mistakes, unexpected legal challenges, or operational vulnerabilities.
User Data Privacy and Compliance (GDPR, CCPA)
Even if you do not custody funds, you likely still collect and process:
Email addresses
Device identifiers
IP addresses
Contact information
Backup metadata (e.g., cloud backups, notification preferences)
Laws like GDPR (Europe) and CCPA (California) apply to you if you touch user personal data.
Checklist for wallet builders:
Implement clear Privacy Policies explaining what user data you collect and why.
Minimize data collection — collect only what you truly need for app functionality.
Offer user data deletion and export mechanisms.
Use anonymized or pseudonymized data where possible (especially for usage analytics).
Store minimal server logs — avoid tying blockchain addresses to IP addresses unless absolutely necessary.
This aligns both with Bitcoin ethos and with modern privacy laws.
Clear Custody Disclaimers
Non-custodial wallets must clearly explain to users:
Checklist for wallet builders:
That they control their own funds.
That if they lose their seed phrase, you cannot recover their funds.
That your company has no access to their Bitcoin.
Add explicit language in your Terms of Service and onboarding screens.
This protects both your users and your company legally.
3. Regulatory Licensing Considerations
In most jurisdictions, operating a pure non-custodial wallet does not require a financial license.
However:
Some regulators do not fully understand the difference between custodial vs non-custodial services.
If you combine your wallet with custodial services (e.g., on-ramps, off-ramps, swaps), then licensing obligations might apply.
Checklist:
Document clearly that you do not hold private keys.
If offering additional services (e.g., buying/selling Bitcoin), consider licensing, partnering with licensed providers, or disclaiming clearly.
Monitor regulatory developments in your operational jurisdictions, especially if operating in Africa, Europe, or the United States.
4. Infrastructure Security
Even in non-custodial wallets, your backend infrastructure (APIs, webhook handlers, mobile apps) must be hardened against:
Webhook injection attacks
Replay attacks
Unauthorized API access
Denial of service attacks
Data tampering
Best practices:
Authenticate all incoming Bitnob webhooks using signatures.
Rate limit your API endpoints (especially send functions).
Use HMAC or JWT for internal API authentication.
Encrypt data at rest and in transit (TLS 1.3).
Implement secure logging practices — never log sensitive data.
Security breaches that leak even metadata (e.g., transaction history, addresses) can cause privacy risks for users.
5. Financial Crime Compliance
Even though your wallet is non-custodial, consider optional compliance measures if operating at scale:
Offer users privacy tips to protect themselves from transaction tracking.
Monitor public blocklists (e.g., OFAC) if offering optional services like on-ramp, swaps, Lightning bridge.
Educate users against using wallets for illicit purposes — include basic warnings in Terms of Use.
You are not legally responsible for user actions if you are purely non-custodial, but building trust and good-faith operations improves your brand reputation long term.
6. Key Management and Recovery Policies
You must design policies for:
What happens if users lose access to their devices
How users are educated about recovery phrases
Whether you offer cloud backups (optional) and how they are secured (end-to-end encryption only)
Never design systems where:
Company employees can access users' keys.
Password resets recover Bitcoin access directly without seed phrase verification.
Non-custodial means no backdoors — for security, legal, and ethical reasons.
7. Transparency with Users
Best-in-class wallets:
Open-source their critical cryptographic code or at least wallet logic libraries.
Publish clear, readable Terms of Service and Privacy Policy.
Educate users with simple, non-technical explanations during onboarding.
This builds trust and aligns your wallet with Bitcoin’s decentralization values.
Final Developer and Founder Checklist
Publish Privacy Policy and Terms of Service.
Make custody boundaries clear to users.
Harden all backend endpoints (authentication, rate limiting).
Minimize and encrypt all user data collected.
Plan for optional regulatory exposure if offering fiat services later.
Educate users: backups, phishing, security hygiene.
Be transparent in your architecture, custody model, and company practices.
Building non-custodial Bitcoin wallets is a major technical accomplishment, but ensuring security, privacy, compliance, and user trust is equally critical if you want the product to succeed at scale.
Bitcoin enables freedom, but freedom without careful design invites chaos . Building responsibly is the true Bitcoin way.
