SEC Proposes New Rules to Simplify Crypto Custody for Investment Advisers

The US Securities and Exchange Commission (SEC) has proposed new rules that aim to make it easier for investment advisers and regulated funds to hold cryptocurrencies on behalf of clients. The proposal, announced on Thursday, would establish a tailored framework governing how registered investment advisers, investment companies, and business development companies hold custody of crypto assets. This change is aimed at modernizing decades-old custody requirements and removing regulatory barriers that have limited advisers' ability to offer crypto-related investments.

Under the proposed rules, crypto assets could be held in self-custody under certain circumstances, while state trust companies could also serve as custodians for crypto assets belonging to clients and regulated funds. The changes could also give regulated funds greater scope to offer investors crypto-related investment strategies, according to the SEC. SEC Chairman Paul Atkins said existing regulations had failed to keep pace with the rapid expansion of digital assets, which have grown into a multi-trillion-dollar market.

The proposal comes as US regulators push ahead with building out a crypto rulebook under their existing authority after the Clarity Act, a sweeping crypto market structure bill, stalled in the Senate in September. The changes could increase competition among crypto custodians, potentially lowering the cost and complexity of investing in digital assets. The regulatory push also comes as crypto markets show signs of renewed momentum following a volatile start to the year, with Bitcoin rebounding over 40% from its July low.