SEC Proposes Rule Changes to Ease Crypto Custody Hurdles for Advisers

The Securities and Exchange Commission (SEC) has proposed rule changes aimed at making it easier for investment advisers and regulated funds to provide clients with exposure to crypto assets.

The initiative addresses a custody problem 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 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.

State trust companies would be permitted to serve as crypto custodians, but only if they meet specific requirements, such as maintaining 'reasonable procedures' to safeguard crypto assets from loss, theft, or misappropriation.