SEC Proposes New Custody Rules to Modernize Crypto Holdings
The Securities and Exchange Commission (SEC) has acknowledged that its regulations have not kept pace with the rapid growth of Bitcoin since its launch in 2008. SEC Chairman Paul Atkins admitted that the agency's rules have failed to adapt to the increasing value of the cryptocurrency market, which has grown from a niche curiosity to a multi-trillion-dollar asset class. The SEC has proposed new custody rules to modernize how advisers and funds hold digital assets, replacing outdated guidance with a clearer regulatory framework.
The proposal amends the Investment Advisers Act and the Investment Company Act to allow registered investment advisers and regulated funds to hold crypto assets under a framework built for today's market. Two provisions stand out: advisers could let clients self-custody crypto assets under specific conditions, and state-chartered trust companies could qualify as custodians, expanding beyond banks and broker-dealers. This change aims to provide a compliant pathway for investment advisers and funds to offer crypto-related guidance to clients, which has been limited by outdated custody rules.
Atkins tied the proposal to a wider push to make the United States the world's leading crypto hub. The public comment period will stay open for 60 days once the proposal appears in the Federal Register, allowing stakeholders to weigh in on the self-custody provisions and the expanded custodian role for state trust companies.