SEC Rule Could Funnel $100 Trillion in Managed Funds into Cryptocurrency Market
The US Securities and Exchange Commission (SEC) has proposed a new rule that could channel a significant portion of the $100 trillion managed by investment advisers into the cryptocurrency market.
The proposed rule, which updates the Investment Advisers Act of 1940 and the Investment Company Act of 1940, would allow registered investment advisers to directly hold Bitcoin and other cryptocurrencies for their clients.
This move is seen as a major breakthrough, as it would remove a significant barrier to entry for investment advisers who have been hesitant to invest in cryptocurrencies due to strict custody regulations.
According to the SEC, the new rule would allow state trust companies and registered broker-dealers to serve as custodians for cryptocurrency holdings, as long as they implement written safeguarding policies and submit annual audited financial statements.
The rule would also allow advisers to hold private keys themselves, but only after they demonstrate that they could not find an approved custodian for the asset.
Currently, Bitcoin funds hold $108 billion, while Ethereum funds have $17.8 billion. Solana and XRP funds have significantly lower holdings at $2 billion and $1.8 billion, respectively.
The proposal has sparked a race to determine which cryptocurrencies will see the first influx of adviser money.
The 60-day comment period will commence once the proposal is published in the Federal Register.