SEC Proposes Easing Crypto Custody Rules for Investment Advisers
The US Securities and Exchange Commission (SEC) has proposed easing rules governing how investment advisers and funds hold cryptocurrency, potentially clearing a regulatory hurdle that has held some businesses back from offering clients digital asset investments. The proposal would let investment advisers hold clients' crypto assets themselves when no eligible custodian is available, with conditions. This includes establishing that no permitted custodian is available for each asset and reassessing that determination quarterly.
The SEC also proposed allowing state trust companies to serve as cryptocurrency custodians, provided they meet certain requirements such as being authorized by the relevant state authority to provide crypto custody, having reasonable procedures to safeguard assets from loss or theft, and ensuring client holdings are segregated from their own assets. The proposal aims to address a practical barrier to crypto investment: investment advisers can struggle to find a qualified custodian for a particular token.
SEC Commissioner Hester Peirce likened the uncertainty to a regulatory 'roller coaster', saying advisers have been 'gritting their teeth and holding on for dear life' while awaiting workable custody rules. The proposal would also allow regulated funds to maintain crypto assets in self-custody with their investment adviser, provided they meet certain requirements.