SEC Proposal Opens Door to Trillions in Adviser Funds for Crypto

The Securities and Exchange Commission (SEC) has proposed a new rule that would allow registered investment advisers to hold Bitcoin and other cryptocurrencies for their clients. This move could potentially unlock access to over $100 trillion in managed adviser funds for the crypto market.

Currently, most investment advisers have refrained from buying Bitcoin in managed accounts due to strict custody regulations. The existing rules required the use of a qualified custodian without clearly defining who could hold a private key. If the new proposal is finalized, it raises an important question: which cryptocurrencies will see the first influx of adviser money?

Under the proposed rule, state trust companies and registered broker-dealers could serve as custodians if they implement written safeguarding policies and submit annual audited financial statements. Additionally, regulated funds might expand their crypto offerings.