SEC releases crypto custody guide for investors on wallet risks
The United States Securities and Exchange Commission (SEC) on Friday issued an investor bulletin on crypto wallets and asset custody, outlining foundational concepts, storage methods, and associated risks for the investing public.
The guidance compares self-custody with third-party custody and advises investors to review custodians’ policies, including whether assets may be rehypothecated through lending and whether client holdings are commingled in omnibus accounts or maintained in segregated customer wallets.
The Bitcoin supply broken down by the type of custodial arrangement. Source: River
The bulletin also describes types of crypto wallets, outlining the trade-offs between internet-connected hot wallets and offline cold storage. According to the SEC, hot wallets face hacking and other cybersecurity risks, while cold storage can lead to permanent loss if a device fails or is stolen, or if private keys are compromised.
The publication adds to the SEC’s investor education materials on digital asset custody and storage practices.
Industry response to the SEC custody guidance
“The same agency that spent years trying to kill the industry is now teaching people how to use it,” Truth For the Commoner (TFTC) said in reaction to the SEC’s custody guide.
Jake Claver, CEO of Digital Ascension Group, said the SEC is providing “huge value” to prospective crypto investors by educating them on custody and best practices.
The bulletin was released one day after SEC Chair Paul Atkins said the legacy financial system is moving onchain.
On Thursday, the SEC authorized the Depository Trust and Clearing Corporation (DTCC) to begin tokenizing financial assets, including equities, exchange-traded funds (ETFs), and U.S. government debt securities.
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