SEC Proposes Framework Allowing Investment Advisers to Self-Custody Crypto Assets

The US Securities and Exchange Commission (SEC) has proposed a new regulatory framework for the custody of crypto assets by investment advisers and regulated funds. The proposal aims to provide a 'compliant pathway' for holding digital assets under rules that were largely created before the internet.

Since the advent of Bitcoin in 2008, the crypto asset market has grown significantly, becoming a multi-trillion-dollar asset class. However, SEC Chairman Paul Atkins noted that the existing rules and regulations have not kept pace with this growth.

The proposed framework would address a key gap for institutional investors by permitting state trust companies to serve as custodians for client and regulated fund crypto assets. It would also allow advisers to 'self-custody' client and regulated fund crypto assets under limited circumstances, including when no permitted custodian is available.