SEC Outlines New Rules for Crypto Custody
The proposal is meant to give investment advisers and funds more clarity on custody, self-custody, and audit rules for crypto assets. The timing lines up with SEC Commissioner Hester Peirce's departure.
Key Takeaways
- The SEC has published a proposal that should make it clearer how investment advisers and funds can hold crypto.
- The framework is meant to set rules for custody, recordkeeping, disclosures, and audit requirements, and it allows self-custody under certain conditions.
- The proposal fits into a broader pro-crypto shift inside the SEC and is open for public comments for 60 days.
The U.S. SEC on Thursday presented a proposal meant to clarify how investment advisers and funds can hold crypto. According to Chair Paul Atkins, the new framework should provide a compliant path where none existed before. He said the old rules were mainly written for traditional assets.
New Rules for Custody
The proposal should make clear which parties may hold crypto assets and how advisers and regulated funds must keep their records and federal disclosures. It also adds more clarity around common industry practices and audit requirements.
Atkins said the existing custody rules were once meant to protect client assets from loss, theft, misuse, and misappropriation. In his view, those rules fall short because they were built mainly for traditional assets and therefore do not fit crypto well in the 21st century.
The SEC also wants to allow self-custody under certain conditions. State-chartered trusts would also be allowed to act as custodians. The proposal is now open for public comments for 60 days.
Broader Pro-Crypto Policy
The move fits into a broader shift inside the SEC toward clearer rules for crypto. The regulator has long been trying to sharpen how federal securities laws apply to the crypto market, with more emphasis on clear frameworks than on piecemeal enforcement.
That also makes this proposal relevant for European crypto followers. U.S. custody rules affect not only funds and advisers in the U.S., but can also help shape how major players worldwide handle the custody, control, and reporting of crypto assets.
Peirce Leaves This Week
The timing stands out. The new move comes one day before Commissioner Hester Peirce leaves, after leading the Crypto Task Force since its launch. She leaves on Friday and will become a professor in Virginia, leaving the commission with only two members.
With the custody proposal, the SEC has now, according to Atkins, addressed every major topic on the crypto agenda that he had previously laid out.
Earlier, the regulator also took a step toward broader market infrastructure with blockchain as the official shareholder register, a proposal that shows how the SEC is looking not only at custody, but also at the underlying recordkeeping for securities.
