Building a crypto wallet from scratch may seem like a strategic move for Web3 startups and blockchain-focused companies.
However, wallet infrastructure sits at the intersection of cryptography, blockchain networks, and regulatory compliance. At this stage, development doesn’t sound so simple anymore, right? A single misstep can lead to irreversible asset loss, reputational damage, or legal exposure.
To prevent making the most devastating mistakes for your crypto wallet, we outlined three major and most common risks when starting a crypto wallet from scratch, and added practical ways to avoid them, right from our development team.
The main way to avoid any risks of custom development is to choose white-label solutions. Don’t hesitate to visit our website to learn more about all services we can develop specifically for your business and according to your personal request quickly, without delays and bugs!
Risk 1 – Poor Cryptography Implementation
Why weak cryptography is a critical risk
Cryptography is the foundation of any secure crypto wallet. Poorly implemented encryption, insecure key generation, or improper random number usage can expose private keys and compromise user funds across the blockchain network.
Even minor cryptographic mistakes, such as reusing nonces, weak entropy sources, or homegrown encryption algorithms, can be exploited. Once a private key is exposed, transactions on public blockchains are irreversible, making recovery impossible.
Key risks and attack scenarios include:
- Data breaches and theft: Attackers can decrypt intercepted communications or stored data to steal personal information, credentials, and financial details.
- Man-in-the-Middle (MitM) attacks: Weak cryptographic protocols allow attackers to intercept, read, modify, and re-encrypt traffic between users and backend services.
- Data manipulation and tampering: Insufficient cryptographic integrity checks enable attackers to alter data without detection, leading to fraud or misrepresentation.
These threats align with the OWASP Top 10, where Cryptographic Failures (formerly known as Insufficient Cryptography) are classified as a critical and widely observed web application security risk.
How to avoid cryptographic failures
To reduce this risk, rely exclusively on battle-tested cryptographic libraries and industry standards.
Also, implement hardware-backed key storage where possible, conduct third-party security audits, and follow best practices for key management across EVM-compatible chains and non-EVM networks. Regular penetration testing and formal verification further strengthen wallet security.
Risk 2 – Third-Party and Supply Chain Risks
The hidden dangers of dependencies
Modern digital crypto wallets depend on multiple third-party components, including SDKs, APIs, open-source libraries, and blockchain node providers.
These dependencies introduce supply chain risks that can affect wallets interacting with major ecosystems such as Ethereum Layer 2s, Solana programs, or Polkadot parachains.
A compromised update, malicious dependency, or unvetted service provider can silently introduce vulnerabilities into the wallet.
In several past incidents, attackers exploited trusted third-party tools rather than the wallet code itself.
How to manage third-party exposure
Mitigation starts with strict dependency audits and version control.
Use reproducible builds, monitor open-source repositories for vulnerabilities, and limit reliance on centralized infrastructure.
Running your own nodes for networks like Ethereum or Polygon, or using multiple RPC providers, reduces single points of failure. Also, establish internal security reviews for every external integration.
Risk 3 – Regulatory Adherence and Compliance Gaps
Why compliance matters for crypto wallets
Last, but not least in our list. Regulatory adherence is often underestimated during early wallet development. However, crypto wallets operate within evolving legal frameworks covering KYC, AML, data privacy, and consumer protection.
Non-compliance can lead to forced shutdowns, fines, or blocked access in key markets.
Digital wallets supporting popular blockchain networks such as BNB Chain or Ethereum frequently attract regulatory scrutiny due to their large user bases and DeFi exposure.
How to stay compliant from day one
To avoid regulatory risk, design compliance into the wallet architecture early.
Work with legal experts to understand regional requirements, especially for custodial features.
Implement flexible compliance modules that can adapt to changing regulations without disrupting core wallet functionality.
Final Thoughts: Building Secure Wallet Infrastructure
Launching a crypto wallet from scratch requires more than clean code and a polished UI. Security, dependency management, and regulatory readiness must be treated as core product pillars.
| Risk | Why It Matters | How to Avoid |
| Poor Cryptography | Exposed private keys lead to irreversible asset loss | Use audited libraries, hardware-backed key storage, and security audits |
| Third-Party & Supply Chain | Compromised dependencies can silently breach wallets | Audit dependencies, use reproducible builds, diversify infrastructure |
| Regulatory Adherence | Non-compliance can result in bans, fines, or shutdowns | Design compliance early and consult legal experts |
For companies planning to launch or scale their own crypto wallet, these risks can become strategic differentiators when handled correctly. A wallet built with strong cryptography, controlled dependencies, and compliance-ready architecture earns long-term user trust and accelerates enterprise adoption.
If you are looking to develop a secure, scalable crypto wallet, working with an experienced wallet development team with white-label solutions can significantly reduce time-to-market and security exposure.
If you want a trusted partner with proven expertise and secure Web3 solutions, our team at Evercode Lab is ready to help!
Develop with Evercode Lab – contact our team to discuss the project in more detail.