SEC Proposes Custody Framework for Regulated Funds and Investment Advisers

The US Securities and Exchange Commission (SEC) has proposed a new custody framework to allow regulated funds and investment advisers to hold digital assets for clients.

The proposal, announced on Thursday, aims to provide a clear regulatory pathway for the custody of crypto assets. According to SEC Chair Paul Atkins, the existing custody rules were 'largely written before the internet era' and do not account for private-key management or blockchain settlement.

The framework would permit state-chartered trust companies to hold digital assets on behalf of clients, and in limited circumstances, allow advisers to custody the assets themselves. This does not mean individual investors controlling their own private keys, but rather the adviser acting as a custodian for client assets.

The SEC has been working on crypto regulations for some time, with Commissioner Hester Peirce leading the agency's Crypto Task Force since its inception. The proposal is part of a broader regulatory push by the SEC to support the growth of the digital asset market.