SEC Proposes New Crypto Custody Rule
The US Securities and Exchange Commission (SEC) has proposed a new rule to clarify how investment firms can handle and keep customer crypto assets. The proposed rule aims to provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before.
According to SEC Chairman Paul Atkins, existing custody rules were designed to protect the assets of advisory clients and regulated funds from loss, theft, misuse, and misappropriation. However, these rules only consider the custody and safekeeping of traditional assets, which is no longer tenable in the 21st century.
The new proposal would permit the use of state-chartered trusts as custodians and would also allow for self-custody by advisers in limited circumstances. Self-custody would only be allowed if an adviser cannot find a qualified custodian ready to take the assets, which would likely be an unusual circumstance.
The proposal is open for a 60-day public comment period and marks the latest move by the SEC to advance its pro-crypto agenda. The agency has recently published its long-anticipated 'Innovation Exemption' for tokenizing securities and proposed its Regulation Crypto Asset, explaining how companies can fundraise using digital assets without running afoul of federal regulations.