SEC Proposes Crypto Custody Rules Allowing Self-Custody in Specific Circumstances

The SEC has proposed new rules for crypto custody that would allow advisers to use self-custody when qualifying custodians cannot hold specific crypto assets. The proposal, issued on October 1 under the Investment Advisers Act and Investment Company Act, includes a 60-day public comment period after Federal Register publication.

The current market backdrop is strong, with Bitcoin trading above $86,000 as the cryptocurrency market enters October. However, some advisers have faced limited custody options for certain digital assets under existing rules.

Under the proposed framework, an adviser would first need to establish that no permitted custodian can hold the relevant crypto asset. The adviser would then reassess that finding every quarter and move the asset within a reasonable period if an eligible custodian later becomes available.