SEC Issues Crypto Custody Warning: Know the Risks Before You Store

SEC releases crypto custody guidance as regulators approve tokenization pilots, national bank charters for digital-asset firms, and blockchain-based settlement systems under Chair Paul Atkins.

The US Securities and Exchange Commission (SEC) has issued fresh guidance urging retail investors to understand the risks and options before storing digital assets, just as federal regulators advance a historic shift toward integrating crypto into the traditional banking system.

The advisory comes amid a broader regulatory realignment that has seen the agency drop enforcement cases, approve tokenization pilots, and clear crypto firms for national bank charters.

The SEC’s Office of Investor Education and Assistance released an investor bulletin outlining the mechanics of crypto asset custody and the trade-offs between self-managed wallets and third-party custodians.

The guidance defines custody as the method through which investors store and access private keys, the passcodes that authorize transactions and prove ownership of digital assets.

It warns that losing a private key results in permanent loss of access, while compromised keys can lead to theft with no recourse.