SEC Releases Cryptocurrency Custody Guidance, Outlining Best Practices for Asset Storage and Common Risks
BlockBeats News, December 14, the U.S. Securities and Exchange Commission (SEC) released a cryptocurrency custody guide, outlining best practices and common risks of various forms of cryptocurrency storage for the reference of the general public, including the difference between self-custody and allowing third-party representation of investors. If investors choose third-party custody, they should understand the custodian's policies, including whether the custodian will use asset lending to "re-hypothecate" custody assets, or whether the service provider will commingle client assets in the same fund pool instead of holding the cryptocurrency in segregated customer accounts.
The guide also outlines the types of cryptocurrency wallets, analyzing the advantages and disadvantages of internet-connected hot wallets and cold wallets (offline storage). According to the SEC, hot wallets are at risk of hacker attacks and other network security threats, while cold wallets are at risk of offline storage failures, storage device theft, or permanent loss in case of private key leakage.
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