SEC Proposes New Crypto Custody Rules to Simplify Digital Asset Operations

The U.S. Securities and Exchange Commission (SEC) has proposed new rules to govern how investment advisers and regulated funds hold clients' crypto assets. The move aims to eliminate legal uncertainty stemming from existing custody rules, which were primarily designed for traditional financial assets.

The SEC's proposal clarifies which organizations can act as crypto custodians and outlines requirements for recordkeeping, federal disclosures, and auditing for digital asset operations. It also allows state-chartered trust companies to serve as custodians.

The new rules would enable investment firms to hold clients' crypto assets themselves under certain conditions, such as when no suitable qualified custodian is available. However, this option would only be allowed if the firm has the necessary expertise and infrastructure to store the assets securely.

The SEC's Chairman Paul Atkins noted that existing custody rules were created to protect client assets from loss, theft, misuse, and misappropriation. He emphasized that those rules no longer reflect the realities of today's financial markets.