The U.S. Securities and Exchange Commission (SEC) has issued official guidance on crypto wallets and custody services for investors. The document outlines fundamental principles for storing digital assets, recommended best practices, and the key risks the public should be aware of.

In its investor education bulletin released on Friday (December 12, 2025), the SEC provides a detailed explanation of various crypto custody methods, ranging from self-custody to the use of third-party custodians. Each option is examined in terms of its advantages, drawbacks, degree of asset control, and the security responsibilities borne by investors.

Custodian Policies and Crypto Asset Management Risks

The SEC underscores the importance of understanding the policies applied by third-party custodians. Investors are encouraged to determine whether service providers engage in rehypothecation—re-lending stored crypto assets—or commingle customer assets in pooled accounts rather than segregating them individually.

Such practices can affect the level of asset protection, particularly if a custodian encounters operational disruptions or legal challenges.

The guidance also discusses common types of crypto wallets. The SEC highlights the distinction between hot wallets, which are connected to the internet, and cold wallets, which are kept offline. Hot wallets are considered more vulnerable to hacking and cybersecurity threats.

Meanwhile, cold wallets carry the risk of permanent asset loss if the storage device is damaged, lost, stolen, or if private keys become inaccessible.

The release of this custody guidance reflects a notable shift in the regulator’s stance toward the crypto industry. Under former SEC Chair Gary Gensler, the agency was widely perceived as taking a tougher approach to digital assets. More recently, the SEC has adopted a more educational role by offering practical guidance to investors.

The bulletin was published one day after current SEC Chair Paul Atkins stated that traditional financial systems are increasingly moving toward on-chain models. A day earlier, the SEC also approved the Depository Trust and Clearing Corporation (DTCC) to begin tokenizing financial assets, including stocks, exchange-traded funds (ETFs), and government bonds.