The US Securities and Exchange Commission has issued fresh guidance aimed at helping retail investors better protect their cryptocurrency holdings as adoption continues to rise.
The guidance was published on December 12 by the SEC’s Office of Investor Education and Advocacy in the form of a new Investor Bulletin.
The bulletin outlines the most common crypto custody models and explains the risks associated with holding digital assets through different arrangements.
The regulator’s move comes as the business of safeguarding digital assets expands rapidly across global markets.
Industry estimates cited by the SEC indicate the crypto custody sector is growing at nearly 13% per year and is projected to reach $6.03 billion by 2030.
The SEC said this growth reflects the increasing volume of assets held outside traditional financial infrastructure and the higher stakes involved in custody decisions.
Against this backdrop, the agency urged investors to closely examine third-party custodians before entrusting them with digital assets.
The bulletin advises investors to understand exactly how platforms store, manage and control customer funds.
“If the third-party custodian is hacked, shuts down, or goes bankrupt, you may lose access to your crypto assets,” the SEC said.
The guidance warns that some custodians may lend out client assets through rehypothecation or pool holdings instead of keeping them segregated.
According to the SEC, such practices have amplified losses during past periods of market stress by spreading risk across multiple institutions.
The agency encouraged investors to confirm whether custodians maintain clear ownership records for customer assets.
It also urged investors to assess how their holdings would be treated if a platform were to fail or enter bankruptcy.
The bulletin stressed that custody arrangements can significantly affect investor outcomes even when crypto market prices remain stable.
The SEC also addressed self-custody, acknowledging its appeal to investors seeking direct control over their digital assets.
At the same time, the regulator warned that self-custody transfers full responsibility for security to the individual investor
“Self-custody also means that you have sole responsibility for the security of your crypto assets’ private keys. If your crypto wallets are lost, stolen, damaged, or hacked, you may permanently lose access to your crypto assets,” the SEC said.
The agency noted that lost private keys typically result in irreversible losses with little chance of recovery.
The bulletin reflects a broader shift in the SEC’s approach as retail crypto ownership becomes more widespread.
Rather than focusing solely on enforcement, the regulator is increasingly prioritising investor education and operational risk awareness.