SEC Proposes Rule Changes to Ease Crypto Custody Challenges for Advisers

The US Securities and Exchange Commission (SEC) has proposed rule changes aimed at easing the custody challenges faced by investment advisers and regulated funds when it comes to providing clients with exposure to crypto assets.

The initiative, published on Thursday, addresses a practical bottleneck that has slowed adoption by firms that want to allocate specific tokens but cannot always find a suitable qualified custodian.

According to the SEC, the proposal would allow advisers to hold clients' crypto assets themselves in cases where no eligible custodian is available, subject to strict conditions.

The proposed framework would require advisers to establish that no permitted custodian is available for each crypto asset in question, and to reassess that conclusion on a quarterly basis.

The SEC also proposes that regulated funds could maintain crypto assets in self-custody with their investment adviser, provided the adviser meets the self-custody requirements and the fund's board oversees the arrangement.

The proposal would permit state trust companies to serve as crypto custodians, but only if they meet specific requirements, including being authorized by the relevant state authority and maintaining 'reasonable procedures' to safeguard crypto assets.

The SEC's proposal would initiate a formal comment period, with public comments accepted for 60 days after the rule is published in the Federal Register.