SEC's Crypto Custody Proposal Falls Short in Addressing DeFi Concerns

Bitwise General Counsel Johanna Collins-Wood welcomed the Securities and Exchange Commission's (SEC) new crypto custody proposal, but said it doesn't fully address questions around decentralized finance.

The SEC proposed a tailored framework for registered investment advisers and regulated funds to custody certain crypto assets and offer crypto investments, which includes potential pathways for self-custody.

Collins-Wood stated that the proposal solves problems asset managers have faced since 2017 but leaves 'important questions about DeFi still remain[ing]'.

The proposed Rule 223-1(b)(7) would allow self-custody in situations where no qualified custodian would hold the assets, subject to controls, reporting, and other safeguards.