diff --git a/COMPATIBILITY.md b/COMPATIBILITY.md
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@@ -0,0 +1,30 @@
+# Wallet Compatibility
+
+BAL (Bitcoin After Life) builds and signs Electrum transactions using
+Electrum's own wallet and signing infrastructure. Its compatibility therefore
+depends on the wallet type in use.
+
+| Wallet type                                    | Status                     | Notes |
+|-------------------------------------------------|-----------------------------|-------|
+| Standard wallet (single-signature, seed-based)  | ✅ Supported                | Primary, fully tested target |
+| Hardware wallets (Ledger, Trezor, Coldcard, BitBox02, Jade, KeepKey, etc.) | ✅ Supported | Any hardware wallet supported by Electrum itself |
+| Multisig wallets                                | ❌ Not yet supported        | Known limitation identified 2026-07-18. Support is planned for a future plugin release. |
+| Electrum TrustedCoin (2FA) wallets              | ❓ Unknown / unsupported    | Known limitation identified 2026-07-18. It has not yet been determined whether or when this will be addressed. |
+
+## What "not supported" means in practice
+
+For multisig and TrustedCoin (2FA) wallets, BAL's behavior has not been
+verified and should be considered **unreliable**. Do not rely on BAL to
+protect an inheritance set up on one of these wallet types until this document
+is updated to mark them as supported.
+
+## Electrum version compatibility
+
+See [`README.md`](README.md) for supported Electrum versions (currently 4.7.2
+and 4.8.0).
+
+## Reporting compatibility issues
+
+If you find a compatibility problem not listed here, please open an issue on
+this repository describing the wallet type, Electrum version, and the exact
+error or unexpected behavior observed.
diff --git a/README.md b/README.md
index 5e1449c..b8b8e47 100644
--- a/README.md
+++ b/README.md
@@ -38,10 +38,19 @@ tests/                   smoke + external-zip regression tests
 
 ## Requirements
 
-- **Electrum 4.7.2** — the last stable release exposing `json_db.register_dict`,
-  which this plugin relies on. Newer versions removed it.
+- **Electrum 4.7.2 or 4.8.0** — the plugin detects which wallet-DB
+  registration API is available (`json_db.register_dict` on 4.7.2,
+  `stored_dict.register_name` on 4.8.0) and adapts automatically.
 - **PyQt6** (bundled with the Electrum desktop GUI).
 
+## Wallet compatibility
+
+BAL currently supports **standard (single-signature) wallets** and
+**hardware wallets** supported by Electrum. **Multisig wallets** and
+**Electrum TrustedCoin (2FA) wallets** are **not yet supported** — see
+[`COMPATIBILITY.md`](COMPATIBILITY.md) for the full compatibility matrix and
+current status.
+
 ## Installation
 
 ### Build the distribution archive