COINOTAG News reports that the SEC custody guide was issued to outline best practices and risks in cryptocurrency storage for the public. The guide helps investors understand the different options for safeguarding their digital assets.
It clarifies the distinction between self-custody and third-party guardians. The SEC emphasizes the importance of informed decision-making when selecting a custody solution. When choosing a third-party custodian, investors should review the custodian’s policies on asset lending or rehypothecation. Additionally, it’s crucial to understand whether client funds are held in segregated accounts or commingled in a fund pool. This understanding helps mitigate counterparty risk and ensures compliance with regulatory expectations.
The guide also analyzes various wallet types, comparing hot wallets (online) with cold wallets (offline). Hot wallets are more vulnerable to cyber threats, such as hacking, while cold wallets face risks related to offline storage failures, device theft, or private-key leakage. Investors must perform enhanced due diligence and implement credible risk controls when engaging with custodians to protect their assets.
Furthermore, the SEC guidance advocates for transparent disclosures, robust security practices, and clear asset segregation. These measures are vital to safeguarding client holdings and maintaining market integrity in the evolving cryptocurrency landscape.
https://bitcoinethereumnews.com/tech/sec-publishes-comprehensive-cryptocurrency-custody-guide-navigating-self-custody-third-party-custodians-and-hot-vs-cold-wallet-risks/