The U.S. Securities and Exchange Commission (SEC) has published a new Investor Bulletin explaining how individuals can safely store their cryptocurrency.
The guide focuses on crypto wallets, private keys, and the risks involved in different storage methods. While the information itself is not revolutionary for experienced crypto users, the publication is noteworthy given the SEC’s historically hostile stance toward the crypto sector in recent years.
Under the Biden administration, the SEC was widely perceived as taking a confrontational approach to crypto, often relying on enforcement actions rather than clear guidance. Under President Donald Trump, however, the tone appears to be shifting. The release of an educational guide aimed at helping everyday investors better understand crypto custody suggests a more pragmatic and user-focused approach.
What a Crypto Wallet Really Does
One of the first misconceptions the SEC addresses is the idea that a crypto wallet actually stores cryptocurrency. In reality, cryptocurrencies never leave the blockchain. What a wallet does is store and protect your private keys, which are required to authorize transactions.
When you create a crypto wallet, two cryptographic keys are generated:
-
The private key, which allows you to approve transactions and move funds
-
The public key, which can be shared with others so they can send crypto to you
The SEC compares the private key to a password and the public key to an email address. Anyone can send you an email if they know your address, but only you can read it if you have the password. In the same way, anyone can send crypto to your public address, but only someone with the private key can spend it.
This distinction is crucial. If you lose your private key, you lose access to your crypto permanently. There is no “forgot password” option on the blockchain.
Hot Wallets vs. Cold Wallets
The SEC then explains the difference between hot wallets and cold wallets, a fundamental concept for crypto security.
Hot wallets
Hot wallets are connected to the internet. They can take the form of:
-
Mobile apps
-
Desktop software
-
Web-based wallets hosted by exchanges
Because they are always online, hot wallets are convenient for trading and daily use. However, this constant internet connection also makes them more vulnerable to hacking, phishing attacks, and malware.
Cold wallets
Cold wallets are not connected to the internet, making them significantly more secure. Examples include:
-
Hardware wallets (physical devices)
-
Paper wallets (written-down private keys stored offline)
Cold wallets are less convenient, as accessing funds requires extra steps. However, for long-term storage and larger amounts, they are widely considered the safest option.
The SEC emphasizes that investors should think carefully about the trade-off between convenience and security.
A great example of a cold wallet is the NGRAVE ZERO.
Self-Custody vs. Third-Party Custody
Another key topic in the SEC’s guide is the difference between self-custody and custodial services.
Self-custody
With self-custody, you control your private keys yourself. This gives you full ownership and eliminates counterparty risk. No exchange or third party can freeze, misuse, or lose your funds.
However, self-custody comes with responsibility:
-
You must securely store backup phrases
-
You must protect yourself against phishing and scams
-
You must ensure heirs can access funds if something happens to you
The SEC notes that self-custody requires a certain level of technical understanding and discipline.
Custodial wallets (exchanges)
Many users choose to leave their crypto on exchanges because it is easier. Exchanges manage the private keys on your behalf, making it simple to trade, stake, or convert crypto into fiat currency.
But this convenience comes with risks. If an exchange is hacked, mismanages funds, or goes bankrupt, users may lose access to their assets. The collapses of platforms like FTX and Celsius are stark reminders that custodial risk is very real.
How to Choose a Custodian
For those who opt to use an exchange or custodian, the SEC outlines several important questions to ask:
-
Does the custodian store most assets in cold wallets?
-
Are customer assets segregated from company funds?
-
Does the custodian lend out customer crypto (a practice known as rehypothecation)?
-
What happens to your crypto if the company goes bankrupt?
-
Is there any form of insurance, and what does it actually cover?
These questions are particularly relevant because, unlike traditional bank deposits, cryptocurrency holdings are generally not insured by government-backed programs.
Security Best Practices
The SEC also reiterates basic but essential security measures:
-
Use strong, unique passwords
-
Enable two-factor authentication (2FA)
-
Be cautious with emails, links, and messages claiming to be from exchanges
-
Never share your private keys or recovery phrases with anyone
Many crypto-related losses occur not because of technical failures, but due to social engineering and phishing scams.
Why This Matters
The fact that the SEC is now publishing clear, neutral educational material about crypto custody is significant. It signals recognition that cryptocurrencies are becoming a permanent part of the financial landscape and that investor education is more effective than fear-driven enforcement alone.
As crypto adoption grows among individuals, institutions, and even governments, understanding how to properly store digital assets becomes increasingly important. The SEC’s guidance reinforces a core principle of crypto: ownership comes with responsibility.
For beginners, custodial wallets may be a practical starting point. For more experienced users or those holding significant amounts, self-custody and cold storage often make more sense. There is no one-size-fits-all solution, but understanding the options allows investors to make informed decisions.
A Subtle Shift in Tone
While the SEC remains a regulator first and foremost, this guide reflects a softer, more educational approach under the current administration. Instead of treating crypto users as reckless speculators, the agency is acknowledging the need for practical guidance in a rapidly evolving financial system.
Whether this marks a long-term change in regulatory philosophy remains to be seen. But for now, investors finally have an official, plain-language explanation from the SEC on one of the most important aspects of crypto ownership: how to keep it safe.
