SEC Sends Crypto Custody Overhaul Proposal to White House

The U.S. Securities and Exchange Commission (SEC) has sent a proposal to overhaul its crypto custody rules to the White House Office of Management and Budget, aiming to clarify and modernize the framework for investment advisers and registered funds holding digital assets.

The proposal, which reached the budget office on August 25, seeks to remove outdated requirements and widen the set of qualifying custodians. While the specific provisions are not yet known, the SEC's move is seen as a significant step in modernizing custody standards for institutions holding crypto for clients.

The overhaul aligns with a broader regulatory effort to keep pace with evolving markets, as evidenced by the European Securities and Markets Authority's (ESMA) coordinated crypto custody review under MiCA earlier this summer. The SEC's decision suggests that its own rulebook is lagging behind market developments.

For now, the overhaul remains a proposal, not a rule, which will require an SEC vote, public comment period, and further review before it can take effect. Registered advisers and funds seeking to custody client crypto must wait through this process, which could widen the set of qualifying custodians if outdated requirements are stripped out.