SEC Proposes Crypto Custody Path for Advisers

What the proposal does

The SEC unveiled draft rules to modernize how advisers and regulated funds safeguard assets, putting special attention on crypto. In situations where no qualifying custodian exists, advisers and funds, operating through their advisory firms, could directly safeguard clients' crypto holdings.

New custody options and recordkeeping

The proposal would permit the use of state trust companies to hold crypto for clients and for regulated funds, subject to conditions. The agency also said blockchain-based records could be used to meet compliance requirements if certain conditions are satisfied.

Why this is moving now

Regulators said they are pressing ahead on digital asset rulemaking even though Congress did not advance the Clarity Act last month. The long-anticipated measure - meant to sort digital assets into securities, commodities, or payment stablecoins - failed to get enough votes to move forward. Leading up to that vote, the SEC sent the White House a proposal intended to "clarify the framework for the custody of crypto assets" for investment advisers and companies. Officials had also said they would proceed with regulating the crypto industry regardless of the legislation's fate.