SEC Proposes New Custody Rules for Digital Assets

The Securities and Exchange Commission (SEC) has acknowledged that its regulations have fallen behind the rapid growth of Bitcoin since its launch in 2008. Chairman Paul Atkins noted that the agency's rules have not kept pace with the crypto asset market, which has grown from a niche curiosity into a multi-trillion-dollar asset class.

To address this issue, the SEC has proposed new custody rules for digital assets. The proposal amends the Investment Advisers Act and the Investment Company Act to provide a clear regulatory framework for the custody of crypto assets. This would give registered investment advisers and regulated funds a compliant pathway to hold crypto assets.

Two key provisions stand out in the proposal. Firstly, advisers could let clients self-custody crypto assets under specific conditions. Secondly, state-chartered trust companies could qualify as custodians, expanding beyond the banks and broker-dealers that traditionally held that role.

The proposal is a significant step towards modernizing the regulatory framework for crypto assets. It arrives weeks after the CLARITY Act stalled in the Senate, and gives institutional investors a defined, compliant path into Bitcoin and other digital assets.