The U.S. Securities and Exchange Commission (SEC) on Friday released a crypto wallet and custody guide investor bulletin that outlines best practices and customary risks of varied types of crypto storage for the investing public.
The SEC's bulletin lists the advantages and risks of varied methods of crypto custody, including self-custody versus allowing third parties to carry digital assets on behalf of the investor.
If investors select third-party custody, they need to understand the custodian's policies, including whether it “rehypothecates” the assets in custody through lending or whether the service provider pools customer assets right into a single pool reasonably than holding the cryptocurrencies in separate customer accounts.
The Bitcoin supply broken down by sort of custody agreement. Source: River
Crypto wallet types are also described within the SEC guide, which breaks down the professionals and cons of hot wallets connected to the web and offline storage in cold wallets.
Hot wallets pose the danger of hacking and other cybersecurity threats, in accordance with the SEC, while cold wallets pose the danger of everlasting loss if offline storage fails, a storage device is stolen or the private keys are compromised.
The SEC's Crypto Custody Guide highlights sweeping regulatory changes on the agency, which was hostile to digital assets and the crypto industry under the leadership of former SEC Chairman Gary Gensler.
The crypto community is hailing the SEC guidance as a transformative change within the agency
“The same agency that spent years attempting to kill the industry is now teaching people use it,” Truth For the Commoner (TFTC) said in response to the SEC’s crypto custody guidance.
According to Jake Claver, CEO of Digital Ascension Group, an organization that gives services to family offices, the SEC provides “tremendous value” to crypto investors by educating potential crypto holders about custody and best practices.
Source: Paul Atkins
SEC regulators released the guidance a day after SEC Chairman Paul Atkins said the legacy economic system was moving on-chain.
On Thursday, the SEC gave the Depository Trust and Clearing Corporation (DTCC), a clearing and settlement firm, the green light to tokenize financial assets, including stocks, exchange-traded funds (ETFs), and government bonds.
