SEC Proposes Crypto Custody Framework with Self-Custody Options
The SEC has introduced a comprehensive proposal to establish clear parameters for how investment advisers and regulated funds maintain custody of cryptocurrency assets. The proposed framework, spanning 760 pages, would allow investment advisers to employ self-custody arrangements under specific circumstances.
These scenarios would primarily emerge when qualified custodians decline or cannot accommodate certain digital assets, such as recently introduced tokens that existing custodians haven't integrated into their service offerings.
The proposal would also expand eligible custodians to include state-chartered trust companies. Investment firms opting for self-custody arrangements would require demonstrated competency in secure asset management and quarterly assessments to determine whether qualified custodian services have become accessible.
Commissioner Hester Peirce clarified that 'self-custody' terminology refers to advisers maintaining client assets, distinguishing this from individuals personally controlling their cryptocurrency holdings. The regulatory move arrives just one day before Peirce's departure following her leadership of the SEC's Crypto Task Force.