A cryptocurrency wallet that is maintained by a third party, which is typically a crypto exchange. Coinbase is an example of such an exchange (see
Coinbase).
Confusing Perhaps?
The term "custodial" is misleading. When users manage their own wallets, such wallets are said to be "non-custodial." However, if users manage the wallets that hold the private keys to their crypto assets, are they not the custodians of their funds? Unfortunately, well-thought-out terminology has never been a primary goal in the technology world. See
crypto wallet,
crypto exchange and
crypto glossary.