SEC Unveils Regulatory Framework for Direct Crypto Custody
The US Securities and Exchange Commission (SEC) has introduced a regulatory framework for registered investment advisers and regulated funds to store digital assets. The framework, known as Rule 223-1(b)(7), allows fund managers to practice direct self-custody of specific crypto tokens under strict reporting requirements, operational controls, and audit safeguards. However, advisers must transfer those holdings to an institutional custodian as soon as an eligible service provider supports the specific asset.
The SEC Chairman, Paul S. Atkins, described the regulatory package as an essential transition toward institutional clarity, arguing that it replaces the regulatory ambiguity created by legacy safekeeping rules designed for conventional paper certificates and central depositories. Atkins stressed that the initiative provides investment advisers and mutual funds with a realistic, compliant pathway to hold emerging digital tokens.
Financial institutions have faced chronic operational bottlenecks since 2017, frequently finding themselves barred from taking exposure to newly launched digital networks simply because chartered institutional banks and institutional trust custodians lacked the technical infrastructure to safeguard those tokens. The SEC's overhaul follows the legislative stall of the Digital Asset Market Clarity Act in the United States Senate last month, effectively shifting the responsibility back to administrative regulators to establish market rules through formal agency procedures.