The U.S. Securities and Exchange Commission has issued updated guidance that sharply raises custody standards for licensed crypto exchanges. Under the new framework, exchanges must keep at least 98% of customer assets in segregated cold storage, a move regulators say is meant to reduce the risk of hacks and misuse of client funds.

The guidance takes effect immediately, signaling a faster push by the SEC to impose stricter safeguards across the digital asset industry. Cold storage, which keeps assets offline and away from internet-connected systems, is widely used to limit exposure to cyberattacks.

The rule change is likely to place new compliance demands on trading platforms that handle customer deposits and withdrawals. Exchanges will need to review their storage, auditing, and internal controls to meet the higher threshold.

The SEC’s action comes amid continuing scrutiny of crypto firms after a series of failures and security breaches that have shaken investor confidence. For customers, the agency says the goal is clearer asset protection and less risk of losses tied to operational lapses.