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SEC Releases Guidelines on Crypto Wallets and Custody, Emphasizing Pros and Cons of Self-Custody and Third-Party Custody
According to Cointelegraph, the U.S. Securities and Exchange Commission (SEC) released a crypto wallet and custody guide on Friday, outlining best practices and common risks associated with different forms of crypto storage.
The SEC guide lists the advantages and disadvantages of self-custody and third-party custody. Investors choosing third-party custody should understand the custodian's policies, including whether assets are rehypothecated or if client assets are pooled.
The SEC guide also discusses the pros and cons of hot wallets and cold wallets. Hot wallets face hacking risks, while cold wallets are vulnerable to offline storage failures or private key leaks.
The SEC's crypto custody guidelines mark a significant regulatory shift for the agency, which previously held a hostile stance towards digital assets under Chairman Gary Gensler.
The crypto community celebrates the release of the SEC guidelines, viewing it as a transformative change for the agency. Jake Claver, CEO of Digital Ascension Group, stated that the SEC provides tremendous value to crypto investors.
The SEC released the guidelines the day after Chairman Paul Atkins announced that traditional financial systems are being tokenized on-chain. On Thursday, the SEC approved DTCC to begin tokenizing financial assets.