SEC Proposes Rules for Cryptocurrency Custody Amid Rapid Market Growth

The US Securities and Exchange Commission (SEC) has published new proposed rules for the custody of cryptocurrency assets by investment advisors and funds. The move aims to provide a clearer regulatory framework for managing digital assets, which have grown into a multi-trillion-dollar market since Bitcoin's whitepaper was published in 2008.

According to SEC Commissioner Paul Atkins, many existing custodial rules were created before the widespread adoption of the internet and have not been updated in decades. The new proposal would allow investment advisors and funds to hold cryptocurrency assets 'self-custody' under certain conditions, provided that a qualified custodian is not available.

SEC Commissioner Hester Peirce noted that self-custody by investment advisors would require an assessment of whether a qualified custodian exists for the relevant digital asset before initiating self-custody. This assessment must be made both prior to and after commencing self-custody, with a review required every quarter.