SEC Updates Guidance for Public Companies Holding Digital Assets

The US Securities and Exchange Commission (SEC) has issued new staff guidance for public companies that hold digital assets on behalf of third-party customers. The guidance focuses on how these companies should disclose balance sheet treatment and risk factors related to crypto custody arrangements.

Crypto custody is not just a technical issue, but also an accounting, disclosure, and investor-protection issue. Public companies need to clearly explain what is on the balance sheet, what is off the balance sheet, what risks exist, and how those assets are protected.

The SEC's staff guidance helps companies understand what information may need to be disclosed. It addresses issues such as private keys, third-party custodians, insurance limits, wallet architecture, legal title questions, bankruptcy risk, cybersecurity controls, and changing regulatory expectations.