SEC Published Guidance on Crypto Wallets

• The SEC published a list of recommendations for storing crypto assets.
• In it, the Commission explained the difference between hot and cold wallets, named the advantages and disadvantages.
• This reflects a change in the regulator’s approach to overseeing the sphere.

The US Securities and Exchange Commission (SEC) published a bulletin dedicated to cryptocurrency wallets. It provides recommendations for investors and lists the risks of this or that method of storing digital assets.

The document defines crypto assets, describes the mechanism for creating and unlocking an account, and differentiates between cold and hot wallets. The regulator also emphasized the importance of responsible storage of the seed phrase.

At the same time, the SEC provided clarification regarding custodial, keys are stored by a third party, and noncustodial cryptocurrency wallets.

In the first case, the user should be aware that in case of loss of access he risks losing digital assets, in the second case — that the custodian can re-secure funds, as well as combine them into a single pool.

The regulator’s general recommendations regarding the safekeeping of crypto assets are as follows:

• when choosing third-party custodians, one should carefully check their data
• keys and seed phrases should not be disclosed
• the amount of crypto-assets should be kept secret
• one should beware of phishing resources
• you should use strong passwords and two-factor authentication to access online accounts

The publication of this and other materials reflects a change in the SEC’s approach to regulating the crypto sphere. The Commission is now educating as well as updating the rules.

Earlier, we reported that the SEC believes that most initial coin offerings (ICOs) do not fall under its jurisdiction.