SEC Proposes Rules for Crypto Assets Custody and Clarifies Staking Receipt Token Classification

The US Securities and Exchange Commission (SEC) has released proposed rules for crypto assets custody by investment advisers and funds. The Proposed Rules allow self-custody of crypto assets, provided that no permitted custodian is available to hold them at the outset and every quarter.

Advisers would need safeguarding systems covering private key management, approval of transactions by at least two persons, and segregation of each client's crypto assets at separate addresses. They must also implement cybersecurity controls, an annual internal control report from an independent accountant, a documented annual review, and quarterly account statements or their equivalent.

The SEC has also clarified the classification of staking receipt tokens in its FAQs on crypto asset classification. The FAQs state that staking receipt tokens are digital commodities if issued by a protocol-based liquid staking provider and digital tools otherwise.