SEC Publishes Comprehensive Cryptocurrency Custody Guide: Navigating Self-Custody, Third-Party Custodians, and Hot vs. Cold Wallet Risks

COINOTAG News reports that the SEC custody guide was issued to outline best practices and risks in cryptocurrency storage for the public. It clarifies the distinction between self-custody and third‑party guardians, stressing informed decision‑making for investors.

When selecting third-party custody, investors should review the custodian’s policy on asset lending or rehypothecation and whether client funds are held in segregated accounts or commingled in a fund pool. Understanding these terms helps mitigate counterparty risk and align with regulatory expectations.

The guide analyzes wallet types, weighing hot wallets (online) against cold wallets (offline). It notes that hot wallets face higher cyber threats, while cold wallets risk offline storage failures, device theft, or private-key leakage.

For investors, the takeaway is enhanced due diligence and credible risk controls when engaging custodians. The SEC guidance supports transparent disclosures, robust security practices, and clear asset segregation to safeguard client holdings and maintain market integrity.