SEC Proposes Framework for Institutional Crypto Custody

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

SEC Chairman Paul Atkins acknowledged that the existing rules have not kept pace with the rapid growth of the crypto asset market, which has grown from a 'niche curiosity' into a 'multi-trillion-dollar asset class' since the advent of Bitcoin in 2008.

The proposal would address a key gap for institutional investors, where qualified custodial infrastructure for some crypto assets may not yet exist. It would also permit crypto assets to be held in self-custody under certain circumstances and allow state trust companies to serve as custodians for client and regulated fund crypto assets.

SEC Commissioner Hester Peirce clarified that the term 'self-custody' refers to advisers acting as custodians for client assets, rather than investors directly controlling their own crypto. She emphasized the importance of protecting investors' right to self-custody, but also noted that 'true self-custody is not the right choice for everyone.'