SEC Warns Investors on Crypto Wallet Risks in New Custody Guidance
The U.S. Securities and Exchange Commission has issued fresh guidance clarifying cryptocurrency custody practices, emphasizing that digital asset ownership hinges entirely on private key control rather than physical possession. The bulletin comes amid growing retail participation in crypto markets.
Two custody models dominate: self-custody, where users manage their own private keys, and third-party custody through exchanges like Coinbase or Binance. The SEC explicitly warns that lost keys mean irrevocably lost assets—a stark contrast to traditional finance's account recovery options.
Hot wallets (MetaMask, Trust Wallet) and cold storage solutions present trade-offs between convenience and security. 'Think of addresses like email inboxes,' the guide states, 'and private keys as the passwords that can never be reset.' The agency's unusually plain-language approach signals heightened scrutiny of crypto infrastructure.
