SEC Proposes Crypto Custody Rules, Opens Path to Self-Custody

The Securities and Exchange Commission on Oct. 1 proposed a new framework for how registered investment advisers and regulated funds can custody crypto assets under federal securities laws.

A tailored custody framework

The proposal covers registered investment advisers along with regulated funds, a group that includes registered investment companies and business development companies.

According to the SEC, the changes would modernize its custody rules and remove regulatory barriers that have held back advisers from giving crypto-related investment advice.

They would also let regulated funds offer clients access to a wider range of crypto asset-related investment strategies.

Atkins says the rules fell behind

SEC Chairman Paul S. Atkins noted that since bitcoin’s arrival in 2008, the year the bitcoin whitepaper was published, crypto has grown from a niche curiosity into a multi-trillion-dollar asset class that investors actively want exposure to.

He said in a statement:

“Unfortunately, our rules and regulations have not kept pace. To that end, today’s proposal would provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before—and replacing the grey of uncertainty created by custody rules crafted for a bygone era.”