SEC Proposes New Rules for Crypto Custody in Wealth Management

The US Securities and Exchange Commission (SEC) has introduced new proposed rules aimed at creating a dedicated legal framework for crypto custody within the wealth management and advisory sectors. The framework, if adopted, would apply to investment advisers and regulated funds, allowing them to work with a wider array of crypto-related products. Similarly, fund promoters would be able to offer investors access to more crypto-related products and vehicles.

The proposed framework seeks to integrate crypto assets and funds into the same regulatory environment as traditional investment vehicles concerning custody. Key provisions include mandatory financial statement audits for registered investment advisers and broker dealers' custodial services. It also permits crypto assets to be held in self-custody under specific conditions.

SEC Chairman Paul Atkins initiated the proposal, highlighting that the crypto asset market has significantly evolved since the creation of bitcoin in 2008. Atkins noted that crypto is no longer a niche curiosity but a trillion-dollar asset class. He emphasized that the framework is designed to provide legal certainty and encourage greater adoption of crypto assets by institutional investors.

Atkins stated, 'Today’s proposal would provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before, and replacing the grey of uncertainty created by custody rules crafted for a bygone era.'