The U.S. Securities and Exchange Commission (SEC) has issued new guidance. The document is intended to help retail investors secure their cryptocurrency savings.
The SEC Office of Investor Education and Advocacy published a relevant bulletin on December 12. It details standard storage models. The regulator also listed the main threats associated with owning digital assets.
Growth of the custodial services market
The agency's attention to this topic is driven by the rapid development of the digital asset storage industry. Industry estimates show that the crypto custodian sector is growing by nearly 13% annually. It is expected that by 2030, its capitalization will reach $6.03 billion.
This statistic highlights the scale of funds that are currently outside the traditional financial infrastructure. Therefore, the issue of managing these assets becomes critically important.
Against this backdrop, the agency has urged investors to thoroughly check third-party custodians. It is extremely important to understand how exactly platforms manage clients' funds.
"If a third-party custodian is hacked, ceases operations, or goes bankrupt, you may lose access to your crypto assets," the SEC warned.
The bulletin notes an important nuance. Some firms may engage in rehypothecation, meaning they lend clients' assets to third parties. Other companies pool users' funds into common pools instead of keeping them in segregated accounts.
According to the Commission's experts, such practices in the past have already led to significant losses. During market upheavals, risks spread to several institutions at once, exacerbating the situation.
In this regard, the regulator recommends determining whether the custodian keeps clear records of ownership rights. Investors should also assess in advance what will happen to their assets in the event of a platform failure. The method of storage can significantly affect the final outcome in the event of failures, even if the market price of the asset itself has not changed.
Risks of self-control
The document also addresses the topic of self-custody. The regulator acknowledges the appeal of this method for investors who wish to have full control over their funds.
However, the SEC warns of high responsibility. Managing your own wallet means that the task of protecting private keys falls entirely on the owner. Losing credentials usually results in irreversible loss of assets. The chances of recovering access in such cases are minimal.
"Self-custody means that you bear sole responsibility for the security of private keys. If your crypto wallets are lost, stolen, damaged, or hacked, you may permanently lose access to your funds," the agency stated.
The publication of this guide reflects a broader shift in the regulator's rhetoric. Retail ownership of cryptocurrencies has become a widespread phenomenon. Therefore, the SEC is now prioritizing education rather than just enforcement measures. The focus is shifting from discussions about the feasibility of investments to managing operational risks.
