SEC Reopens Crypto Custody Rules After Failed 2023 Attempt

The regulator wants to spell out more clearly how investment advisers may hold client crypto after the failed attempt under Gary Gensler in 2023.

Key Takeaways

• The SEC has put new crypto custody rules back on the agenda and sent the topic to the White House.
• The regulator wants to make it clearer how investment advisers should store clients' crypto assets within existing rules.
• An earlier attempt in 2023 failed after heavy pushback from the industry and was withdrawn last year.

The U.S. Securities and Exchange Commission (SEC) is taking another step toward new crypto custody rules. This week, the regulator sent the topic to the White House's Office of Budget and Management, an early step before there is even a concrete proposal. With that, the SEC is trying to make it clearer how investment advisers should comply with the existing rules for holding clients' crypto assets.

New SEC Attempt

According to the current description on the public rule agenda, the SEC wants to modernize the rules around custody of client assets and fund assets, including crypto assets. The regulator also says outdated provisions could be removed if they are no longer needed for investor protection, given the development of markets and trading and custody methods.

The wording is still vague, but the direction is clear: the SEC wants to further normalize the handling of crypto in the U.S. within the existing oversight framework. It is still not known when the proposal will actually appear. The agenda does mention a possible timing in October, but those estimates often end up shifting.

Earlier Attempt Stalled

The previous attempt in 2023 fell apart after heavy resistance from the industry. Then-chair Gary Gensler warned that, in his view, investment advisers could not simply rely on crypto platforms as qualified custodians. The proposal would have forced advisers to place client crypto with a narrow group of firms, such as a bank, trust company, registered broker-dealer, or futures commission merchant.

That approach drew pushback from groups including the Small Business Administration and investment firm a16z. They said the plans were too heavy-handed, legally hard to carry out, and risky for smaller advisers. In the end, the proposal did not get final approval before Gensler left, after which it was withdrawn last year.

Why This Matters for Europe

For European crypto followers, this is mainly relevant because the U.S. still plays a major role in how institutional players store and trade crypto. If the SEC really opens up or clarifies the rules further, it could affect how banks, trust companies, and crypto firms structure their services in the U.S. market. That is also interesting for firms active in multiple markets, including European providers with U.S. ambitions or customers.

Under Chair Paul Atkins, the tone now sounds friendlier toward crypto. Since the previous attempt, more federal trust bank charters have also been added, allowing more institutions to manage crypto assets. The SEC also has a separate proposal on crypto compliance for broker-dealers on the agenda, alongside broader plans around securities tokenization. That fits with the broader shift toward regulated firms, such as Zerohash, which filed again for an OCC trust charter.