SEC Proposes Framework for Institutional Crypto Custody
The U.S. Securities and Exchange Commission (SEC) has proposed a new framework for investment advisers and regulated funds to hold crypto assets through expanded custody options. This move aims to update federal custody rules that were largely developed before digital assets existed. SEC Chair Paul Atkins described the proposal as a compliant pathway for institutions seeking exposure to cryptocurrencies.
The proposed framework would address a long-standing challenge for institutional crypto adoption: the limited availability of qualified custodial infrastructure for certain digital assets. Under the proposal, investment advisers and regulated funds could use state trust companies as crypto custodians. The rules would also allow advisers to custody crypto assets themselves in limited circumstances, including when they determine that no permitted custodian is available.
However, the proposal does not mean investors directly controlling their own private keys. Commissioner Hester Peirce clarified that adviser self-custody refers to advisers acting as custodians for client assets rather than individual investors choosing personal wallets.
The proposal could reduce one of the barriers preventing traditional asset managers from holding crypto directly. The practical impact will depend on final rules, custodian availability, and how firms implement compliance controls.
SEC Chair Paul Atkins said, 'Since the advent of Bitcoin in 2008, the crypto asset market has grown from a niche curiosity into a multi-trillion-dollar asset class to which investors actively seek exposure.' He added, 'Unfortunately, our rules and regulations have not kept pace.'