New Guidelines for Cryptocurrency Asset Storage: SEC Explains the Choice Between Cold Wallets and Hot Wallets

The U.S. Securities and Exchange Commission (SEC) released an important guide for cryptocurrency investors in mid-December, providing an in-depth look at how to securely store digital assets. This investor notice addresses the current diversity of storage methods in the cryptocurrency market, each with varying risks, offering systematic decision-making references for a broad range of investors.

The Storage Dilemma Faced by Investors

As the cryptocurrency market matures, the ways investors hold digital assets have become increasingly complex. Should they manage their assets themselves or entrust them to professional institutions? This seemingly simple choice actually involves multiple layers of risk considerations. The SEC’s newly issued guide aims to help investors understand the potential risks and mechanisms behind different storage options.

Self-Custody vs. Third-Party Custody: SEC’s Risk Warnings

The core divergence in cryptocurrency storage choices lies in whether to delegate to a third-party institution. The SEC guide emphasizes that if investors choose to entrust their assets to custodial institutions, they must fully understand how these institutions operate. For example, some custodial firms may lend out client assets to generate returns—this appears to increase earnings but significantly raises asset risks; others may pool assets from many clients into a single fund, rather than keeping them in separate client accounts, which also increases the risk of assets being misappropriated.

In contrast, self-custody provides investors with the most direct control over their assets but also means they must bear higher technical and management responsibilities.

Hot Wallets and Cold Wallets: Each Has Its Advantages

The SEC guide specifically analyzes two main types of wallets: hot wallets and cold wallets. Hot wallets, due to their internet connectivity, offer high convenience and fast transaction capabilities, making them suitable for investors who trade frequently; however, because they are constantly online, hot wallets face higher risks of hacking attacks.

Cold wallets adopt offline storage methods, effectively isolating assets from online threats. This gives cold wallets a significant advantage in security, especially suitable for long-term holders; but their transaction processes are relatively cumbersome, making them less ideal for scenarios requiring frequent deposits and withdrawals.

How Should Investors Decide

The SEC guide does not provide a single definitive answer but emphasizes that investors should weigh their options based on their own circumstances. For large asset holdings and long-term investment, a cold wallet combined with self-custody or trusted third-party services is a preferable choice; for frequent trading and limited funds, hot wallets offer greater convenience. Regardless of the method chosen, fully understanding the associated risks is the foundation for making rational decisions.