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

The U.S. Securities and Exchange Commission has issued a fresh warning to crypto investors, reminding them that how and where digital assets are stored matters just as much as what you buy. As crypto adoption spreads beyond early adopters into mainstream portfolios, the SEC says many investors still underestimate custody risks.

At the core of the warning is a simple message: owning crypto does not always mean controlling it. When users store assets on centralized exchanges or platforms, they may not actually hold the private keys. That means if an exchange freezes withdrawals, gets hacked, or collapses, access to funds can be delayed—or lost entirely.

The SEC also highlighted risks tied to third-party custodians, including unclear ownership rights, weak internal controls, and limited investor protections compared to traditional financial institutions. Unlike banks, crypto custodians are often not insured, and customer assets may not be fully segregated.

Self-custody, while offering full control, carries its own dangers. Losing private keys, falling for phishing attacks, or making simple transfer mistakes can permanently wipe out funds—with no customer support to call.

The takeaway isn’t to avoid crypto, but to understand custody choices before investing. Whether using an exchange, a custodian, or a hardware wallet, investors are being urged to ask one question first: who actually controls the keys?

In crypto, control equals ownership—and the SEC wants investors to remember that before it’s too late.