The US Securities and Exchange Commission has proposed a 760-page framework governing how investment firms hold clients' crypto assets, including a limited path for advisers to custody digital assets themselves when no qualified custodian is available.
What the proposal covers
Published on Thursday, October 1, the proposal covers registered investment advisers, registered investment companies and business development companies. It would set conditions for state trust companies to serve as custodians, clarify recordkeeping and auditing requirements, and remove barriers that limit advisers' ability to offer crypto-related investment advice.
Under the proposal, an adviser could hold a client's crypto itself only when it cannot find a qualified custodian ready to take the asset — likely an unusual circumstance, though it could apply to newly launched tokens that custodians do not yet support — with that arrangement reviewed every quarter. The approach grew out of an industry request to the SEC's Crypto Task Force.
Atkins: "grey of uncertainty"
SEC Chair Paul Atkins said the 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." He has said the agency wants to make the US the "crypto capital of the world," and described blockchain technology as holding the potential to modernize the financial system.
Why now
The move is the SEC's latest push to fill the regulatory void around crypto after the CLARITY Act, industry-friendly legislation aimed at building a regulatory framework, failed to make it out of the Senate last month. It also comes a day before the exit of Commissioner Hester Peirce, an outspoken advocate for crypto in her eight years at the agency. Her departure leaves the five-seat commission with just two members, both Republicans; the White House has not nominated candidates for the two vacant Democratic seats.
The public will have 60 days to submit feedback once the proposal is published in the Federal Register, before the SEC decides whether to finalize the rule.
Sources: Morningstar / Dow Jones: SEC Floats Framework for Holding Crypto Assets | CNA / Reuters: Wall Street regulator proposes rules on investment adviser crypto asset custody | CoinDesk: SEC Maps Out Crypto Custody in New Proposal
What the proposal covers
Published on Thursday, October 1, the proposal covers registered investment advisers, registered investment companies and business development companies. It would set conditions for state trust companies to serve as custodians, clarify recordkeeping and auditing requirements, and remove barriers that limit advisers' ability to offer crypto-related investment advice.
Under the proposal, an adviser could hold a client's crypto itself only when it cannot find a qualified custodian ready to take the asset — likely an unusual circumstance, though it could apply to newly launched tokens that custodians do not yet support — with that arrangement reviewed every quarter. The approach grew out of an industry request to the SEC's Crypto Task Force.
Atkins: "grey of uncertainty"
SEC Chair Paul Atkins said the 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." He has said the agency wants to make the US the "crypto capital of the world," and described blockchain technology as holding the potential to modernize the financial system.
Why now
The move is the SEC's latest push to fill the regulatory void around crypto after the CLARITY Act, industry-friendly legislation aimed at building a regulatory framework, failed to make it out of the Senate last month. It also comes a day before the exit of Commissioner Hester Peirce, an outspoken advocate for crypto in her eight years at the agency. Her departure leaves the five-seat commission with just two members, both Republicans; the White House has not nominated candidates for the two vacant Democratic seats.
The public will have 60 days to submit feedback once the proposal is published in the Federal Register, before the SEC decides whether to finalize the rule.
Sources: Morningstar / Dow Jones: SEC Floats Framework for Holding Crypto Assets | CNA / Reuters: Wall Street regulator proposes rules on investment adviser crypto asset custody | CoinDesk: SEC Maps Out Crypto Custody in New Proposal
