SEC Issues Guidance on Cryptocurrency Custody

SEC releases guidance on cryptocurrency wallets and custody of digital assets.

The United States Securities and Exchange Commission (SEC) has released an investor bulletin focused on cryptocurrency wallets and the custody of digital assets.

The document outlines the advantages and risks of various methods. It specifically highlights the dangers of storing coins on centralised platforms and explains the workings of cold wallets.

According to the SEC, if investors choose a third party, they should understand the custodian’s policy, including whether the service provider engages in “rehypothecation” of assets by lending them out or pooling client assets instead of storing cryptocurrency in separate accounts.

“With self-custody, you control your crypto assets and are responsible for managing the private keys to any of your wallets. You have exclusive control over access to the private keys,” the guidance states.

The regulator also emphasised the importance of securely storing seed phrases.

Positive Signals

The crypto community views the SEC’s publication of educational material on wallets as indicative of a new direction for the regulator.

“The same agency that has spent years trying to dismantle the crypto industry is now teaching people how to use it,” stated representatives of Truth For the Commoner.

Jake Claver, CEO of Digital Ascension Group, believes that the Commission is providing “tremendous value” to crypto investors by educating potential cryptocurrency holders on custody and best practices.

Overall, the SEC’s post on X received many positive comments. Some users noted the regulator’s changed approach—”education before enforcement.”

Back in December, Commission head Paul Atkins predicted a deep integration of traditional finance and blockchain. Citing his statement, Bitwise CIO Matt Hougan suggested a potential 20-fold growth in the crypto market.