SEC Proposes New Rules for Digital Asset Custody

The US Securities and Exchange Commission (SEC) has proposed new rules for the custody of digital assets, aiming to provide clearer guidelines for investment advisers and fund managers. The proposal, led by SEC Chairman Paul Atkins, seeks to revise the custody provisions in the Investment Advisers Act of 1940 and the Investment Company Act of 1940. This move is a response to the rapid growth of the crypto market, which has outpaced the existing regulatory framework.

The proposed rules will allow for the use of self-custody mechanisms for certain cryptocurrencies, provided that certain standards are met. State-chartered trust companies can also be recognized as crypto custodians for assets managed by an adviser or regulated fund. This may enable more institutions to offer custody services than are currently available for traditional assets.

The SEC is seeking public comments on the proposal, which will be open for sixty days following its publication in the Federal Register. The commenting period will give stakeholders the opportunity to provide input on the proposed rules, including those related to self-custody, state-chartered trust companies, and the protection of clients' assets.