Yeliz Akmaca 
The U.S. Securities and Exchange Commission (SEC) has released a new investor-focused guide addressing how retail users store and safeguard crypto assets. Rather than offering purely technical definitions, the bulletin emphasizes how custody choices directly shape investor risk, control, and long-term asset security.
According to the SEC, crypto custody decisions should be evaluated independently of price volatility. A single mistake in wallet management can result in irreversible losses, regardless of market conditions.
Why it matters?
As crypto adoption expands, custody risk has become a core investor protection issue shaping regulatory scrutiny and market trust.
Key ownership does not mean access unless the private key is controlled
The SEC draws a clear distinction between public keys and private keys, highlighting a common source of investor confusion. A public key functions only as an address that allows others to send crypto assets. It does not grant access, control, or withdrawal rights.
This clarification carries behavioral importance. The SEC notes that misunderstanding this difference can fuel scams or false security assumptions. True control over crypto assets exists solely through possession of the private key or recovery phrase, not through public identifiers.
The message is direct: visibility does not equal control, and access rights are never shared accidentally.
Cold wallets reduce online risk but carry permanent loss exposure
Cold wallets are often viewed as the safest storage option. However, the SEC cautions that offline storage introduces a different category of risk. Hardware failure, physical theft, or loss of recovery phrases can permanently eliminate access to crypto assets.
The bulletin stresses that such losses cannot be reversed through technical support or legal intervention. Private keys cannot be regenerated, and assets cannot be recovered without the original seed phrase. From a regulatory perspective, cold wallet users must accept full responsibility for both security and continuity planning.
The SEC advises investors to weigh convenience against the reality that some custody errors have no remedy.
Third-party custody raises consent, data, and behavioral risks
Using exchanges or professional custodians can reduce technical complexity, but the SEC highlights hidden risks that investors often overlook. One critical focus is consent. Some custodians may rehypothecate customer assets or hold them in pooled accounts rather than segregated wallets.
The SEC urges investors to confirm whether explicit approval is required for such practices. In the post-FTX environment, transparency around asset use has become a central regulatory concern.
Data privacy is another key pillar of the guidance. Beyond asset security, the bulletin encourages investors to examine how custodians handle personal information. Identity data, transaction history, and asset holdings may be shared or sold to third parties unless restricted by policy.
To reduce behavioral and operational risk, the SEC highlights the importance of the following practices:
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Awareness of phishing attempts and malicious links
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Mandatory use of multi-factor authentication
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Clear disclosure of data-sharing and privacy policies
According to the SEC, effective crypto security combines technical safeguards with informed, disciplined investor behavior.
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