The SEC Has Proposed New Crypto Asset Custody Rules for Investment Advisers and Funds

• The SEC has unveiled a new regulatory approach to the custody of crypto assets by investment advisers and funds.
• The proposal allows for self-custody of digital assets, provided certain conditions are met.
• State-registered trust companies will also be able to act as custodians.

The U.S. Securities and Exchange Commission (SEC) has proposed new rules and amendments governing the custody of crypto assets by registered investment advisers and affiliated funds. This was stated in the regulator’s announcement.

The initiative provides for a standalone regulatory framework for working with digital assets under the Investment Advisers Act of 1940 and the Investment Company Act of 1940. The SEC said the changes are intended to remove regulatory barriers that limit investment advisers’ ability to provide crypto-related services.

Under the proposal, investment advisers and regulated funds would be able to self-custody crypto assets if certain conditions are met. In addition, they would be allowed to engage state-registered trust companies as custodians.

The SEC also plans to update a number of existing requirements, including rules on auditing investment advisers’ financial statements, custodying assets through broker-dealers, recordkeeping, and disclosures.

SEC Chair Paul Atkins noted that the current rules have not kept pace with the development of the digital asset market.

“The proposal will create a clear regulatory framework for the custody of crypto assets and provide investment advisers and funds with a legally compliant mechanism where one previously did not exist,” he said.

The public comment period for the initiative will last 60 days from the date the document is published in the Federal Register. After that, the SEC will be able to review the feedback received before making a final decision on the rules.

Previously, we reported that the regulator had approved limited onchain trading in tokenized stocks. 

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