SEC Proposes New Crypto Custody Rules for Advisors, Funds

SEC Updates Custody Framework for Digital Assets

The U.S. Securities and Exchange Commission on Thursday proposed new rules governing how investment advisors and regulated funds can hold crypto assets. The core of the proposal allows advisors and funds to take self-custody of client crypto, but only as a last resort – when a “permitted custodian” is unavailable.

SEC Chairman Paul Atkins stated the agency’s existing regulations haven’t kept pace with the growth of the crypto market, which he noted has evolved from a “niche curiosity” to a “multi-trillion-dollar asset class” since Bitcoin’s inception in 2008. The proposed rules aim to address this gap and provide a “clear regulatory framework” for crypto custody.

The SEC indicated that blockchain-based records could be used for compliance purposes, subject to certain conditions. Additionally, state trust companies could be authorized as custodians for client and fund crypto holdings, again with stipulations. This development arrives after the recent procedural block of the Clarity Act, a bill intended to clarify the regulatory classification of digital assets.

Despite the setback for the Clarity Act, regulators signaled their intent to proceed with crypto regulation. Atkins has publicly affirmed his commitment to establishing the U.S. as a leading hub for the crypto industry, regardless of legislative progress. The proposal was initially sent to the White House for review prior to public release.

Source: Bitcoin Magazine