Overview
- The SEC’s Office of Investor Education and Assistance published a Dec. 12 bulletin explaining crypto custody basics, clarifying that wallets store private keys rather than the assets themselves.
- The guidance stresses that private keys cannot be changed or replaced and that losing a key or exposing a seed phrase can permanently forfeit access to funds.
- It distinguishes hot wallets from cold storage, noting the trade‑off between online convenience and exposure to cyber threats versus offline security with physical loss and damage risks.
- The bulletin outlines self‑custody versus third‑party custody responsibilities and urges due diligence on custodians’ regulatory status, insurance, rehypothecation and commingling policies, cybersecurity practices, privacy protections, and fees.
- Coverage frames the release as part of a regulatory pivot highlighted by Chair Paul Atkins’ comments about markets moving on‑chain and recent approvals tied to tokenization and crypto ETP mechanics, alongside a reduced emphasis on enforcement.