SEC Proposes Crypto Custody Rules Amid Shrinkage of Its Commission
The Securities and Exchange Commission (SEC) has proposed new rules for the custody of cryptocurrency assets. The proposal, announced while the agency prepares to operate with only two commissioners, would provide a 'compliant pathway' for investment advisers and regulated funds to hold cryptocurrencies.
Under the draft rules, investment advisers could hold client crypto themselves, but only when no permitted custodian is available. This would require at least two authorized individuals to approve any transfer of assets, and the adviser would need to reassess their determination every quarter.
The proposal also allows state trust companies to serve as cryptocurrency custodians, provided they meet certain conditions such as segregating client holdings from their own assets and keeping audited financial statements.
Commissioner Hester Peirce, who leads the agency's crypto task force, said that advisers have been waiting for workable custody rules and that this proposal would provide a much-needed solution. Commissioner Mark Uyeda noted that adviser custody creates an 'inherent conflict of interest', but that fiduciary duties would continue to apply when advisers hold clients' cryptocurrencies.