SEC Revives Crypto Custody Proposal Amid Market Growth and Regulatory Uncertainty
The Securities and Exchange Commission (SEC) has revived its proposal for a custody rule that would govern how investment advisers handle client cryptocurrencies. The original effort, which stalled in 2023, aimed to narrow the venues where advisers could park client crypto assets.
The new version of the proposal is still largely unknown, leaving compliance teams in limbo as they try to plan for a rule whose text has not been published.
The custody rule is a contentious issue that sits at the center of how registered investment advisers can hold any client property, including digital assets. The traditional model breaks down when it comes to clearing and settlement, making it difficult to determine which platforms can legally hold client funds.
The stakes are high for market participants, as custody rules determine which platforms can hold client funds, how often those assets must be audited, and whether advisers can use crypto-native infrastructure without triggering enforcement risk.