What counts as self-custody?

I've seen orgs ship what's effectively a 2-of-3 multisig or MPC where they keep 2 of the 3 shares. While arguing that this is still noncustodial for legal purposes!

This allows nice UX like phone or email recovery.

No judgement, just curiosity: does that work?

Real World Ethereum 🌎 
building /daimo ✳️ 

Honestly, I'd say it's non-custodial if you only have 1 of 3 keys. Your balance can essentially be zero'd or frozen at any given time.

I think the larger part of the argument comes to loss prevention/recovery. If the single user can approve a drainer, can they argue the "noncustodial" side should've prevented that?